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How to handle being declined for credit

Getting declined for credit can be a depressing, even demoralizing event. But whether it is for a credit card, a loan, or a mortgage, there are still ways to get back on one’s feet. This article discusses the different things you can do or think about, to get yourself a better second chance.

Understand why the application was turned down

If you are denied, the institution needs to explain and elaborate what caused the rejection. They will usually send an adverse action letter, which explains the reasons, and also provides information on the credit reporting agency which provided data about your credit history.

You can get a free credit report from this agency, and a free access to your credit score which was used by the institution to determine your credit worthiness. By writing to the agency, this information can be provided to you.

Going back to the adverse letter, this specifies the reason why your application was denied, making it easier for you to address the cause to better your chances at reapplication.

Do something to remedy your current situation

Now that you know why your application is rejected, then you can specifically plan actions to improve the cause. If it is an income issue, then you can seek more opportunities to make more money; if it is your current debt status, then you can address that first before taking another chance. There are instances where even people with good credit standing still end up being turned down – because they have other debts in which the company you are applying for may be uncomfortable with, as this questions your capacity of being able to handle more debt.

If the problem is regarding your credit standing, then you may need to boost it further. Using the report from the agency, you can also check for any mistakes that could have been detrimental to your application. Check as well for any evidence of any fraudulent transactions that could indicate that you are a victim of online identity theft. Clearing these things up could do vast improvements to your overall credit rating.

However, there may be times when the report is legitimate and truly problematic. With this, you can modify your spending and paying habits – by spending less and paying on time to reduce debt and liabilities. If you remain consistent, your rating will see improvements in a few months’ time, making it easier for you to reapply.

If you need to establish or rebuild your credit you can apply for forms of credit that are easier to obtain and maintain – such as secured credit cards or a co-signed loan. By being careful with your spending and always paying on time, your credit standing will be in good shape in no time.

Think if you need to reapply

Many of us apply for more credit even if they were turned down recently. However, this is a behaviour that should be avoided. These institutions keep a close eye on their potential borrowers, and several applications within a short period of time could signify that you are desperate for credit.

If you know what the root of the denial is, then perhaps you can address this to build good habits that can get you the money you need without having to obtain credit.

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