You wait for approval with bated breath only to find that you have been turned down. “We regret to inform you that you do not fit the lending criteria that we follow. We encourage you to apply to another lender,” is what you are informed through an email or message.
Such a message can add insult to injury when you are in dire need of money. Now is the time you discover the reason for the rejection. Lenders generally do not inform the reason why they failed to move on with your application.
It is not surprising that you put the rejection to your low credit score, but this could not always occasion the rejection of your application. A lender peruses multiple factors to determine your affordability. Credit rating is just a part of it.
It is sad that you were declined to get a loan, but you do not need to be down in the dumps and carry out the guesswork. You should rather find out how you can turn it to your advantage. You must know how you can deal with the reason for the rejection of your loan.
- Review the reason for the denial
If a lender has turned you down, you should work out what could be the cause for the rejection. Most of the time, lenders do not openly disclose the reason for not entertaining your application, but you can persuade them to do so. You are in with a chance.
Getting to the bottom of reality is not implausible if you carefully examine your financial condition. First off, you should look at your credit report. You can get a free copy of it from all credit reference agencies once a year.
Check if all your details are accurate - your name, address – the whole kit and caboodle. Examine if your credit report shows up some unidentified debts. If so, this could be a case of identity theft. If you have already taken on multiple debts, your lender becomes sceptical about your repaying capacity.
A debt-to-income ratio should not be higher than 30%, including the one you are taking out. You may find that your credit score is already too low. Though you can take out quick cash loans in Ireland despite a bad credit score, there is no guarantee.
Sometimes your credit score cannot be too bad, but a couple of late payments can hold a lender back from giving the nod. Another reason for not qualifying for a loan is that you have a too-limited credit history. Having no credit history at all also works against you.
- Build or improve your credit history
If you do not have a credit history, you should try to build one. Here are some tips for doing so:
- Take out a credit-builder loan. You will be paying down the debt over an extended period. Timely payments over the course of time will help build a credit score.
- Use a credit card to buy something. When you make payments in instalments within the grace period, it will help build your credit rating.
Do not assume that a lender will see you as less risky as you do not have a credit report. You do not have evidence to prove that you will keep up with payments. Therefore, you should try to build your credit history.
If your credit rating is bad, you should try to take certain steps to do it. Here is what you can do to boost your credit file:
- You should ensure that the debt-to-income ratio is not more than 25%.
- Try to pay off your debts as soon as possible.
- Stick to payments of rent, mobile bills, energy bills, etc. Paying on them may not contribute to your credit score, but missed payments will pull your credit points.
- Make sure that you do not close the old credit cards because otherwise, it will increase the credit utilisation ratio.
It is crucial that you work on your credit history. It must be as good as it can be. Talk to financial experts for some advice.
- Apply with a different lender
It is likely that another lender will sign off on your application. Each lender has different criteria. You never know which one you will fit in. Before you apply to a new lender, you should do proper research. If you have a bad credit rating, make sure that the lender you are applying to accepts applications from bad credit borrowers too.
Do not make the mistake of applying to multiple lenders because if you do so, it will have a trail on your credit file. Each time a lender runs a hard credit check, that leaves hard inquiries on your credit file. Each inquiry will pull your credit score by five points. This will quickly add up, and you will see your credit score dwindle.
Lenders will assume that others have turned you down because you are an extremely riskier borrower. You are in desperate need of money that you applied to multiple lenders at the same time. You might rely on only loans to fund your needs. This gives lenders the wrong impression.
The final word
Private money lenders in Ireland can sign off on your application when you have a bad credit rating, but it does not mean that you should not improve it. Some lenders can turn you down because your credit file is not impressive at all. You should check if there are any other reasons for rejection. Make sure that you work on that to increase your chances of acceptance. Do not be in a rush to apply for a loan. Multiple inquiries on your credit report from many lenders will do more harm than good.
