Five Most Common Reasons For Credit Denial

When prospective lenders inquire about your credit standing, they examine your record with certain expectations. To evaluate your own report, you need to know those expectations.

Five most common reasons for credit denial based on a credit report are as follows:

1. Delinquent credit obligations: Late payments, bad debts or legal judgments against you make you look like a risky customer.
2. Credit application incomplete: Perhaps you left out some important information or made an error on the application. Any large discrepancy between your application and your credit file can count against you. The lender will wonder if you are hiding something.
3. Too many inquiries: Inquiries are made whenever you apply for credit. Requesting your own report also counts as an inquiry, but is usually not held against you. At the creditor’s discretion, as few as four inquiries within six months’ time may be considered a sign of excessive credit activity. The creditor may then presume that you are trying desperately to get credit and are being rejected elsewhere.
4. Errors in your file: These may arise simply from typing mistakes, or from confusing your name with someone else’s similar name. If you have changed your address, this can also create problems in the recording of your credit history. Since the credit bureaus handle millions of files, the possibility for error is substantial. Errors can be found and corrected only by carefully reviewing your file for accuracy and then taking the necessary steps to correct any errors that you do find.
5. Insufficient credit file: Your credit history is too scanty for the type of amount of credit you requested. You need to develop your credit history more fully before qualifying for the level of credit you are now requesting.

Always examine your credit record before applying for credit. Periodic checking is important because credit bureaus can and do make mistakes in their credit information. They may confuse you with another individual, carry erroneous information in your file, or perhaps include false, incomplete or one-sided information provided by a creditor. Most of these problems can be resolved once you understand the procedures.