It’s no fun being denied anything, especially credit. Usually when someone is trying to get a line of credit, it’s for a big reason or major life milestone. Having a credit application denied can feel like a real setback. But this rejection isn’t something to take personally. It’s more common than people realize and doesn’t spell doom for your financial future. In fact, credit denials can be a good opportunity to take proactive steps to improve your credit health long-term.
How will I know I’ve been denied credit?
If a lender denies your credit application, they will send you a letter called an adverse action notice. Don’t worry—it sounds more menacing than it really is. This letter will explain why the lender denied your application and give you information about the credit reporting agency they got your information from. With the notice, you are entitled to get a free credit report from that agency within 60 days. While the credit reporting agency provides your information, the lender ultimately makes the decision on whether to grant credit or not. If you need more information specifically about your denial, it’s usually best to contact the lender directly.
Why was I denied credit?
Reasons for a credit denial will vary by lender, the types of credit requested and your personal credit history. The adverse action letter will list the reason or reasons why you were denied. There are many reasons a credit application could be denied. Common causes include having a limited credit history, too many recent inquiries and a high balance on current credit accounts. But every situation is different. If you are still unsure about the denial reason after reading the adverse action letter, you can call the lender to find out more.
What should I do if I am denied credit?
If you are denied credit, you don’t, technically, have to do anything. But that’s probably not your best option. It’s natural to feel bummed about being rejected, but use the denial as a motivator to make strides to improve your credit health. Your credit report acts like your financial resume, showing your history of what you’ve done with credit. Read it carefully to see if there are any areas where you could do better. Are your balances too high? Create a financial plan that includes paying them off as quickly as possible. Did you miss a payment recently? Set up automatic payment options on your monthly bills so you’re always on top of it. Don’t forget to check your report for inaccuracies, as they can occasionally play a role in a denial.
If you’ve been denied credit, learn more and take that first, important step by getting your TransUnion credit report at transunion.com/deniedcredit. Whatever the cause of the denial, there’s a solution. No financial plan is completed without setbacks, but don’t allow those setbacks to keep you from taking action. With some perseverance and a little bit of patience, you can achieve your financial goals.