It is not uncommon if you are denied credit nowadays while applying for either mortgage, credit cards or auto loan. Fortunately, you won’t be left in the dark. According to the Equal Credit Opportunity Act, you can expect a letter from the creditor and find out the reasons your application was denied and you also have the right to request for a free credit report within 60 days of receiving the creditor’s notice to better understand your credit denial issue.
Based on the Fair Credit Reporting Act, you have the right to request the creditor who turns down your application to give you the contact info of the credit reporting agency that supplies the information to the creditor. Although the credit reporting agency can let you know what it is on your report, the only party that can tell you why you are denied credit is the creditor.
If you find out that you are denied credit due to too much balance on your cards, close to the credit limits on the cards, or too many accounts open, your best bet is to pay down your credit card debt and then apply it again. Your credit file will be updated and you will have good chance to get your application approved.
From time to time, you are denied credit because of the inaccurate information or negative items on your report. If this happens, you should dispute credit report with both credit reporting agency and the company that supplies the info to the reporting agency.
So, what else can you do to improve credit score besides disputing credit report?
There are many factors that can affect your credit score. You may not know exactly how scoring system works; however, you can try to focus on the following information and improve your credit score gradually:
Pay your bill on time. Any late payments or unpaid bills will hurt your score to some degree and sometimes it can cause your account get referred to the debt collections.
Pay down your debt. The credit system evaluates your score also based on the amount of balance you owe compared with the credit limits you have. You want to have the ratio as low as possible to avoid any negative impact on your score.
Maintain credit history Generally, payment history plays significant factor on scoring. The longer the credit history you have, the better score you will get. So, don’t just close your oldest or older accounts because you are not using them.
Stop applying for new credit cards. Every new application credit inquiry on your credit report can harmfully affect your score. So, don’t go out to buy expensive items and apply for new credits while you are trying to get a new home loan or car loan.
I’m sure you don’t want to see yourself being denied credit. Therefore, the best way to improve credit score and get your application approved is to follow the above tips and wait for your credit report to be updated. Once you notice the improvement on your report, you will certainly get the loan term you want.