I have good credit, but lenders still don’t love what they see… What gives?
It just doesn’t seem fair. You have worked extremely hard to get a good credit score, and yet lenders are not impressed when they review your credit report. How is this even possible? For example, plenty of people report an inability to get approved for a credit card, even though they are in perfect standing repaying their multiple lines of credit on a car, house, and student loans. Folks might have a credit score well over 700, and yet cannot get a new line of credit. What is the deal? Not to fear, there is some rhyme to the reason, read on to learn more.
Every loan is different
First of all, every loan application is going to be looked at differently, depending on the type of loan you are applying for, and the different company or bank to whom are applying. Banks are all different in the way that they assess whether or not they are going to extend a new line of credit to you, so don’t necessarily be surprised if you are approved for a credit card at one bank but rejected for a card (without an explanation) with similar terms at a different bank.
Limited (if good) Credit History
Here’s the deal: Lenders need evidence that you are creditworthy. It may be that you have always paid all of your loan repayments and monthly credit card bills in full and on time, but that doesn’t mean that you’ve shown that you can be trusted with large amounts of debt over longer periods of time. Young people and those with one credit card with a low limit are regulars in this category of folks who haven’t done anything wrong, per se, but who haven’t done enough right (yet) to merit new and/or larger lines of credit
Keeping Bad Company
Sometimes your financial associates can negatively affect your credit report. Whether current or from the past, you should be aware of the records of people with whom you share bank accounts or mortgages. Credit bureaus will consider their history when looking at you, and it can have a negative impact on your creditworthiness.
A Few Other Factors
It’s possible to have a decent credit score while still making a few mistakes. Maybe you don’t manage your credit cards well in the eyes of lenders by maintaining too high of a debt to limit ratio (remember, you’re shooting for around 30% or lower), or perhaps you’ve had your limit reduced at some point. Timing of the problems could be an issue, as well. Say you have a solid credit score and are on top of your finances, but recently made a mistake and forgot to make a monthly loan repayment on time. Although your credit score will get knocked down a bit for a short time (assuming you get back on the wagon immediately), it really isn’t a huge deal for your score. However, it will show up on your credit report, and might cause a prospective lender to hesitate on approving a new line of credit due to the fact that this mistake was recent.
Finally, one other possibility is that there could be plain old-fashioned mistakes on one or more of your credit reports. Remember, it is extremely common for the credit bureaus to make clerical errors on reports, so if you don’t check your reports regularly and clear up any errors, you may find yourself paying for someone else’s financial irresponsibility.
Don’t feel bad if you have a good credit score but still get turned down for new credit, you are far from alone. Remember that it can take a lot of dedication and patience to get your credit history to the level you want, but it is possible. If you do get a surprise rejection, take the time to go through your credit report and review your credit card habits to look for ways to improve your creditworthiness.