Denied Credit? 7 Ways to Improve Your Chances Next Time

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As if being denied credit wasn’t bad enough, rarely are we told why. Not only are you stuck without the loan you needed, you have no clue what to do about it.

That’s all about to change.

We’re going to walk you through figuring out why you were denied credit, what you can do about it now, and how to make sure you’re approved in the future. Let’s get started!

Figure out why you were denied credit

First of all, you’re going to want to know why you were denied credit.

However, if a lender is not quick to divulge why they won’t extend you an approval, figuring it out might take some digging on your part. Here’s what you can do.

Step 1: Find your credit score

Even if you’re not denied credit, you should know your credit score. While it used to be quite difficult to get your credit score, now you can get your credit score for free from a variety of places.

Just keep in mind that the credit score you see may not be the exact same one the lender sees. That’s because everyone has multiple credit scores, but most lenders consider your FICO score. Even so, if you focus on the range your credit score falls into rather than the specific number, you’ll get a good sense of how strong your credit is.

Step 2: Examine the reason code

A lot of credit score platforms will give you a description explaining why your score is what it is. Some might also give you a numerical code called a reason code.

If you see a reason code, type it into ReasonCode.org and read the description that comes up.

For example, let’s say your reason code is “02: No accounts with valid credit amount.” Depending on where you checked your score, you might see the number and a description following it or you might just see the number. All you need is the number.

So with this example, if you type “02” into the website above, you’ll get a detailed description of what that means. This detailed information will include an explanation and advice telling you what you can do about it.

In this case, the explanation states more or less that the credit file doesn’t have enough credit behavior and the actionable advice is to maintain open and active credit accounts.

Step 3: Review your credit report

While credit reports aren’t the same as credit scores, the information on your credit report can factor into your score. That’s why it’s important to review your credit report regularly.

You can check your credit report once per year from each of the three major credit reporting bureaus at AnnnualCreditReport.com. Comb through your report and look for any errors. You might find that an error or account you didn’t even know about (like an old library fine in collections) is hurting your score.

If there are errors on your credit report, dispute them immediately and start the process of repairing your credit score.

Step 4: Try to get some information from the lender

This one is a long shot, but you lose nothing by trying.

Ask the lender if they can give you some insight into why you were denied. Perhaps there’s a minimum income requirement or a credit score range the lender looks for.

Again, they’re not likely to tell you much. But if you do get some information, you’ll be able to improve your chances for next time.

What to do if you’re denied credit

1. Look at alternative credit

Just because you were denied credit doesn’t mean there aren’t other types of credit you can be approved for in times of need. There are types of alternative credit offered by certain lenders to help.

For example, Upstart awards personal loans based on more than just your credit report. They also examine your years of credit, education, your area of study, and your job history. In other words, other factors in your life can help you get approved.

Another personal loan lending platform, Avant, might also be more willing to work with you if your score or income weren’t high enough to get the credit you originally wanted.

Keep in mind that these other types of credit can come at higher interest rates. Therefore, they should only be used if you really need to get approved for credit in the next month or so.

Check Out loans through Avant Today

2. Wait and improve your chances

If you were applying for credit for a big ticket item like a home, then you might want to pause and work on your credit score or income first.

Other types of credit can be a great tool in times of immediate need. But if you’re entering into a long-term loan, then it’s best to optimize for the best interest rate and terms you can get. Even waiting one year to improve your credit score can make a huge difference over time.

Check out the graph below from myFICO to see just how much of a difference your credit score – and the interest you’re charged because of it – can make.

types of credit

How to make sure you’re approved next time

1. Start building credit if you haven’t already

One of the reasons someone can be denied credit is by not having enough credit in the first place. Lenders want to see some proof that you’ll repay your debt – and if you don’t have a credit history they can’t make that determination.

One way to start building credit is to get a credit card and use it for small purchases each month. Just make sure to pay your credit card off before the end of the month; going into debt to build credit is never a good idea. You don’t need to maintain a balance to improve your credit. You simply need to use credit and pay it off on time.

2. Make on-time payments

The good news about building credit is it can be pretty easy. Simply paying all of your bills on time can have a significant impact on your credit. That includes your cell phone bill, utility payments, medical bills, and more, which can all get reported to collections if you pay late.

Therefore, never pay late on any of your accounts. Payment history is a huge part of your score and the easiest to accidentally damage. Stay on top of your payments and your credit score will thank you.

3. Free up credit

If you’re currently battling credit card debt, it’s going to drag down your credit score. That’s because lenders want to see a credit utilization ratio of 30 percent or less. Essentially, you’re should only use 30 percent (or less) of all the available credit at your disposal.

So if you’re nearing the top of those credit limits, it’s time to focus heavily on paying those balances down.

I know paying off debt is easier said than done. But if you focus on paying more than just the minimum – even create a targeted debt payoff plan – you might find faster progress than you expected.

Few things will keep you in debt longer than only paying minimums on a credit card.

4. Increase your credit limit

If your debt payoff is going to take a lot longer than you would prefer, you can get a quick boost to your credit score by increasing your credit limit. That’s because increasing your credit limit will decrease your credit utilization ratio immediately.

Think about it this way: If you have a $5,000 credit limit and a $4,000 balance, you’re pretty close to maxed out. But if you increase your credit limit to $8,000 while not adding any more to your balance, now you’re only at the halfway mark. It’s still not the ideal 30 percent utilization or less, but it’s definitely an improvement.

Keep in mind that you have to apply for a credit limit increase with your credit card issuer, which means you’re again applying for new credit. However, because they already have a lending history with you, that could potentially improve your chances for approval.

Just make sure not to use any of that new credit limit. Continue to focus only on reducing your balances, not adding to them.

5. Clean up your credit report

As mentioned above, any blemish on your credit report can get in the way of developing a good score and being approved for credit. But that doesn’t just mean credit reporting errors.

If you see an unpaid account on your credit report that you forgot about, don’t ignore it. Contact the lender that has the account and bring it back to zero so you don’t have unpaid accounts bringing your score down. This won’t get them removed from your credit report right away, but it can get them marked as paid so you can move on.

6. Pick up a side gig

Income is a large factor in approval for credit. Plus, extra income can help you pay off existing debt and lower your credit utilization. So if your need a boost in your take-home pay, consider picking up a side gig to help.

7. Ask for a raise

Another effective way to improve your income without taking on any additional work is to ask for a raise.

Timing does matter: if you just got a raise or are a few months into a new job, it could look out of place to ask for a raise. However, if you’re nearing a work anniversary or the end of the year, start preparing that pitch. Even a small bump in your salary could get you into that coveted credit approval zone you’ve been aiming for.

Play the long game

There’s no question that being denied credit is frustrating. However, as you work towards eventually being approved, don’t get discouraged. Building credit, increasing your income, and generally gaining access to more financial opportunity isn’t a short game.

Stay focused, be consistent, and remember what you’re aiming for in the long run. With time, you’ll be able to get your finances where you need them to be and get the type of credit you want when it comes up.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
6.26% – 14.87%1$5,000 - $100,000Visit SoFi
6.99% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
6.99% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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