Why Can’t I Get a Loan?

Getting rejected for a loan can be heartbreaking, but it’s not the end of the world. Here are ways to ensure your loan gets approved.

Having your loan application rejected can be a serious blow, but understanding the reasons the lender declined you can help you qualify the next time.

When a lender rejects your loan application, they are required to explain why in writing. While this is helpful, the reason the lender gives may be a broad generalization. The reasons lenders will reject you include:

  1. An error on your credit report. Errors, like unrecognized accounts or incorrectly reported late payments can lead to a rejection.
  2. Poor credit history: A poor credit history is a one-way ticket to rejectionville. Banks seek late payments, repossessions, foreclosures and bankruptcies as key reasons to immediately reject your application.
  3. Too much debt: Lenders look closely at debt-to-income ratios, as these indicate your ability to pay your debts with your salary. Home loans are particularly interested in this ratio. Check out our debt management for more on beating this issue.

Why Can’t I Get a Home Loan?

Each prospective homebuyer’s loan file is unique, but there are some common issues that may be to blame for your rejection. The most common hurdle is your credit score. This is one of the key items lenders look at when deciding to approve a loan, and having a poor credit history, which leads to a bad score, can end in a quick rejection.

If your spouse is on the loan, his or her credit will also impact your chances of the bank approving your application. You might have an impressive credit score, but if your spouse’s score is lagging, it would be hard to obtain a loan with him or her on the loan. One thing to keep in mind here is that your spouse’s credit will not impact any loan that he or she is not a part of, as the lenders only look at who is applying for the loan, not their family or household members. It’s a common misconception that you marry your spouse and their credit history.

Other factors that determine your prospects of getting a home loan include:

  • Debt-to-income ratio
  • Steady and reliable income
  • Liquid assets

Why Can’t I Get a Student Loan?

Getting financing for your education can be tricky. Lenders are all about risk, and they want to be confident you can pay back. As a college freshman straight out of high school, you likely have no experience handling finances, and lenders see this as a huge risk. Many lenders require you to have a minimum credit score of 660 to 680, and it is rare to come out of high school with any credit score, let alone one that high.

This can make it hard to get financing as a student, but If your parents have a good credit score, they can help you out a few ways. They can add you as an authorized user on their credit card, which results in their payment history reflecting on your credit report. Alternatively, they can cosign a student loan for you.

Minor Issues That Can Affect Your Loan Application

  • You forget to include work history or source of income.
  • You earn less income than you claimed.
  • You miswrote your Social Security number.

Always review your loan paperwork carefully before submitting it, as one wrong number or one missed line can result in a rejection. Sure, you can recover easily, but it’s an embarrassing moment nonetheless. Make sure to double-check your Social Security number, job history, income, address and name. Also, always make sure you are 100% accurate with your income, as this is a huge part of getting a loan, and fudging your income can not only get you rejected, but it’s technically a fraud attempt.

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