Bob, Vice President, Lending

We understand that being declined for a loan can be a disappointing and perhaps an embarrassing experience. However, this is the time to take control of your finances by objectively evaluating your credit and financial situation and making necessary changes.


First, start by getting as much information as possible. Don’t be afraid to ask for specifics, including how you can improve your potential for loan approval in the future. Lenders are required to tell you why you were declined for the loan. The most common reasons for declined credit are negative credit history and/or a high debt-to-income ratio (monthly payments divided by before-tax income). You are also entitled to a free copy of your credit report when you have been declined for a loan. The decline notice you receive from the lender will have the contact information for the credit reporting agency used and you can request a copy of your credit report directly from them. You need to submit a request within 60 days from the time of your credit application.


Next, it’s probably time to tune up your credit and make yourself a more viable loan applicant in the future. Here’s how:


1. Monitor your credit. Federal law allows you to obtain a free credit report each year. A report can be requested at Read the report carefully and correct any errors you may find by contacting the appropriate creditor.


2. Improve your credit picture:

If you were declined for high debt-to-income ratio, which means that, in the opinion of the creditor, your outstanding obligations are too high in relation to your income to be able to grant new credit. Paying down or eliminating obligations and/or increasing your income will be essential.


If you were declined for negative credit history, your number one priority is to pay all future payments on time to establish good payment patterns. Try setting up automatic transfers or automatic bill payments to make sure your payments are on time.


If you were declined for a lack of credit history, start with a low-limit starter credit card. Use it and pay on time every month. Also, consider using a co-signer such as a parent if you’re starting out to make up for your lack of established credit.


3. Adjust your application request. If you’re applying for a Visa credit card, you may be approved for a lower credit limit, for example, a Visa with a $1,000 credit limit instead of $5,000. If you’re buying a car, consider putting more down or look for a lower cost option.


4. Re-apply elsewhere. Different lenders use different credit criteria and pricing, so if your credit or loan request is borderline, you may want to consider trying another lender.


Use these tips to get your credit in shape and you’ll be on the road to success. In many cases, trying again in six months or a year may make a difference. But don’t go overboard with credit applications. Every time you apply for a loan or credit card, an inquiry is placed on your credit report. Too many inquiries will negatively affect your overall credit picture by making you appear undisciplined in your use of credit.


Depending on your circumstances, it may take awhile to improve your credit report and credit score. Using these tips, however, will improve your credit picture over time and help you qualify for credit in the future.


Be patient, responsible and consistent and credit will be available to you when you need it.