Credit Denial Letter Avoid These Common Mistakes!

Credit denial letter guide to the 8 most common reasons for denial and how to fix these mistakes in 30 days or less!

This is a letter that is sent to a applicant advising him or her that the application has been denied and list the reasons for the 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.

Credit Denial Letter

The eight most common reasons for a denial of credit letter based on a credit report are as follows:

  • Your Income: Is below their minimum requirement. Is insufficient to sustain payments on the amount of money you requested or could not be verified
  • Delinquent obligations: Late payments, bad debts, or legal judgments against you make you look like a risky customer.
  • Your Employment: You have not been on your job very long or your employment could not be verified.
  • Application is incomplete: Perhaps you left out some important information or made an error on the application. Any large discrepancy between your application and your fico report can count against you. The lender will wonder if you are hiding something.
  • Your Payment History: Of making payments on time was not satisfactory or could not be verified.
  • Too many inquiries: Inquiries are made whenever you apply for a loan. 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 activity. The creditor may then presume that you are trying desperately to get loans and are being rejected elsewhere.
  • Errors in your file: These may arise simply from typing mistakes, or from confusing your name with someone else’s similar name. Since the 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.
  • Insufficient credit file: Your history is too scanty for the type or amount of the loan that you requested. You need to develop your financial history more fully before qualifying for the level of credit you are now requesting

The Equal Credit Opportunity Act (ECOA), ensures that all consumers are given an equal chance to obtain a loan. This doesn't mean all consumers who apply for a loan get it, factors such as income, expenses, debt, and financial history are considerations for creditworthiness.

When you receive a credit denial letter you have the right:

  • To know whether your loan application has been accepted or denied within 30 days of filing it.
  • The creditor must either give you the specific reasons for the rejection or tell you of your right to learn the reason for the credit denial letter if you ask them within 60 days.
  • Acceptable reasons for a denial letter are: Your income is way too low or you haven't been employed long enough.
  • Unacceptable reasons are: you didn't meet their minimum standards or you didn't receive enough points on their credit scoring system. Indefinite or vague reasons for a credit denial letter are illegal.
  • To have credit in your birth name, your first name and your spouse’s last name, or your first name and a combined or hyphenated last name. Make sure, however, that the name on your report is consistent with the name under which you applied for credit.
  • To keep your own accounts after you change your name, marital status, reach a certain age, or retire unless the creditor has evidence that you are unwilling or unable to repay a loan.
  • To get a loan without a co-signer if you personally meet financial worthiness standards and to have a co-signer other than your spouse, only if one is necessary.
  • To receive an explanation as to why your account was closed or why the terms of your account were changed.
  • To receive a specific explanation of why you were offered less favorable terms than you applied for, such as higher finance charges or less money than you requested.
  • However, this does not apply if you accept the less favorable terms by signing a contract.

To avoid getting a credit denial letter always examine your financial record before applying for a loan. A credit bureau 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 causing you to get a credit denial letter. Most of these problems can be resolved once you understand the procedures.

Periodic checking of your credit report is important because bureaus can and do make mistakes in their file information.

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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.