If You are Denied Credit

Have you been disappointed by a denial of credit? Have you felt confused as to why? Here’s how to handle the situation.

If a creditor rejects your application, they must provide you with a Notice or Letter of Adverse Action explaining why. Instead of ripping it up in disgust, take the time to read the reason stated, then you will know how to proceed.

Possible Reasons for a Credit Denial

1. You have too much credit.

Yes, there is such a thing as having too much credit, even if all the accounts are paid on time. If you have a half dozen credit cards and they are all maxed out, that would be an example. Maxed out credit could mean you are living beyond your means. It could mean you are living off your credit cards, which is a slippery slope into financial trouble.

The cure is to stop using credit and work on paying down your balances.

2.  You have late payments.

If you paid more than 30 days late in the past year, that could cause your denial. Especially now when creditors are concerned about people getting laid off work, they are not willing to take a risk on you if you paid late to another creditor.

The cure is to establish a perfect record of paying on time before applying for more credit. You should also read your credit report to make sure it is accurate. You have the right to receive one free credit report each year. Send your request through the U.S. mail to:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281

Simply write: Please mail my free annual credit report to me at (your address). Include a piece of identification such as a copy of your driver’s license and an electric bill showing your name and address. That way, they will know it’s you and not a scammer.

3. You don’t have established credit.

Everyone has to start sometime. If you are a young adult or new to the United States, how can you establish good credit if no one will give you an opportunity?

The cure is to open a secured credit card with your local bank. You deposit funds, often $300 to $500, that guarantee the creditor will be paid. Use the credit minimally, keeping your balance below 30% of the limit. Pay off the entire balance each time the bill comes in. After six months, they will convert the secure account to a regular account and refund your deposit.

For more ideas on how to establish top tier credit in the easiest and shortest way possible, pick up a copy of Build and Protect Your Credit Like the Pros here.