Rejected Loan? Lenders Must Now Tell You Why
Posted on July 24, 2011
If you have been turned down for financing, you typically had to remain in the dark as a consumer when the rejection letter came. Consumers have a right to request a free copy of their credit report after being denied financing but were essentially left to their own devices when it came to figuring out why they had their application turned down.
However, starting this week, the Dodd-Frank Financial Reform Act will change the way rejections work. A new rule is being implanted that requires lenders to explain in greater detail why a consumer received a denial. Lenders are now required to display credit score information used to make the rejection decision. Consumers will be able to see their credit score range as well as the credit history data that was used in the decision process. The rule also allows consumers to be told about the factors that contributed to the decision, including negative information that affected the consumer credit score. The lender must also disclose which credit reporting agency provided the information.
On July 21, the new Consumer Financial Protection Bureau will officially launch and will be responsible for enforcing the new rules. Consumers will now have more power in their own credit status and receive more detailed information on what factors they must work on in their credit repair strategy. While it is wiser to check a consumer credit score prior to applying for a loan, consumers still have the opportunity and the data to be more effective about repairing damaged credit and improving their credit scores enough to qualify for financing in the future.
With many factors influencing a credit score, creditors are looking closer at credit histories when making lending decisions. With the ability to review credit information with a more informed eye, consumers will have a head start on making necessary credit improvements for their future.
Before heading into a new financing situation, when you have had credit problems in the past, it is wise to do some due diligence to improve the chances you will not be issued a denial. Here are two important steps for getting prepared:
Double Check Your Status
It is not just enough to think you have your credit back in good standing, you should confirm this to be true prior to applying for any financing or lines of credit. Review your credit report for accuracy and order your credit score online. You essentially have instant access to your information so you have no excuse for not checking.
Clarify the Lender’s Requirements
Depending on the type of loan, credit or other financing you are seeking, you should always check in prior to completing any application to find out what the credit requirements are. Some types of lenders will put the standards they follow right on their website, while others may be more flexible in their requirements based on an individual’s income and credit history. The only sure way to know what to expect is to ask questions. Reputable lenders should have nothing to hide and will be willing to discuss what they are looking for in applicants.
Even after you completed your due diligence and things seem to be in order, it is still possible that things will not turn out the way you hoped. Here are some things to think about when you’ve been turned down for new credit or received an offer much less desirable than you anticipated.
Stay Cool, Remain Polite
In some cases, individuals are prone to flying off the handle when they have been denied a loan or extension of credit, blaming the entire situation on the lender. However, burning bridges while working on better credit health is not a good idea. You may need this lender in the future. At the very least, you need to accept the fact that your credit history is based on the decisions and actions you’ve made in the past and no one else is really to blame. Be polite and thank the lender for their time. Don’t hesitate to calmly inquire about the basis for denial so you’ll have some feedback as to what you should do better with concerning credit repair.
Work Through the Disappointment Later
Some people may burst into tears when they realized their plans have been dashed or act in some other desperate manner. While it may be expected that you are upset, you should do your best to remain as professional as possible and work out the alternatives in private.
Don’t Give Up
While you may be very discouraged and even downright mad about what transpired, it is better to have gone through the experience if you have learned even more from your mistakes. Don’t let rejection stop you from moving forward with your credit repair activities. Sometimes you just don’t have the experience and knowledge to make a real improvement in your credit score. Seeking professional help can be a surprisingly affordable option (I recommend the number below), considering you can have a company with 20 years of experience help you improve your credit score.
If you have been denied something because of your credit history, you will have to find alternative means of financing for your cause or intentions. This is where you can really financially savvy and work on a budgetary system to find more cash. You may also want to consider different resources for finding supplemental income to increase your savings and reach your goals more efficiently.
Stop purchasing things that you can’t afford to pay off immediately! If you’ve dug yourself into a financial rut, it’s probably best to contact a professional credit repair service to help you get back on track. But make sure you do your research! Some companies lack the skills and experience needed to make a difference.
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