Good credit score, turned down for a loan. Oh no! You’re at a loss; this just doesn’t make sense. What does this mean? What do you do now? Don’t worry, here’s what might have happened, and here’s what you can do to work things out.
Good Credit Score, Turned Down For a Loan? Here’s What To Do Next
Your income is too low.
One reason you might have been turned down for the loan is because your income is too low for the amount you want to borrow. If you’re looking at purchasing something that costs too much in relation to what you’re making, the lender could deny you. To solve this problem, make sure you reported all sources of income to the lender. This includes side businesses and second jobs – anything you do to bring in money is considered.
Your debt-to-income ratio is too high
When you’re applying for a loan of any type, your bank is going to carefully examine your debt-to-income ratio, or your DTI. This is a measure of how much you’re paying out on a monthly basis in relation to your income. To figure out your DTI, add up your monthly payments (including rent/mortgage, auto loan, and minimum credit card and student loan payments) and divide that number by your gross monthly income.
Lenders generally like to see a DTI of 36% or less. If your DTI is higher, or if taking on this new loan will put you above the 36% mark, you could be denied the loan. Banks tend to see borrowers with a DTI of 36% or higher as a risk as they may be in over their head and might miss payments.
Paying off your debt is the best way to reduce your DTI and make the loan application process much smoother.
You’re self-employed or have an irregular income
Banks typically like to see a strong history of income or employment before granting a loan. So, if you have a traditional office job, you’ll have nothing to worry about. It’s people who have an irregular income or who are self-employed that are going to find it more difficult to get approved for a loan.
This is again because lenders don’t like making risky loans. Even if you have a perfect record when it comes to paying your bills, they’re still going to worry that you’ll lose your income. Therefore, you’ll get denied.
If you have an irregular income or are self-employed, then make sure you have records of your income and employment. And have tax documents ready as well to show that you’re a good earner. This can help ease the mind of the bank and maybe help get you that loan.
There’s an error on your credit report
This one is quite often the silent killer. If there’s no other obvious reason as to why you’ve been denied the loan, then check your credit score. Sometimes just a small mistake in your credit score can keep you from getting approved for a loan. So go through your report to look for any mistakes and get them fixed as quickly as you can.
Good credit score, turned down for a loan? Do you have more questions about why it’s happening to you? Let us know! Go Clean Credit is here to help! Call us at 1-866-991-4885!
No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.
We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.