| If you have been rejected for a credit card, a loan or for store credit, there are a number of factors that could have caused the rejection. You may have been repeatedly late in paying your bills; you may have more credit or loans already available to you than your income can cover; you may have judgments against you; or perhaps one or more of your credit accounts may have been sent to a collections agency.
If you have been denied credit, your first step is to order, carefully review and verify the information on your credit report. When your application for credit is rejected, the lender is legally required to provide you with the name and contact information of the credit bureau used to obtain your report. You will be able to receive a free copy of your credit report.
Once you know that you have a credit problem, you should:
- Keep in mind that there are no quick "fixes" to repair your credit record. Avoid so-called credit repair companies that promise to change your credit report for a fee.
- Understand that negative information (late payments, non-payment or exceeding your credit limit) can stay on your credit report for seven years.
- Take immediate action on delinquent, unpaid accounts. If you cannot repay the account in full, at least bring the account "current" so that you are no longer "behind" in your payments.
- Keep all credit accounts current by making payments on time. On credit card payments, always pay at least the minimum due.
- Create and maintain a budget. Understand how you are spending your money and create a plan that will help you cut back.
- Be diligent with your finances so that positive new information is added to your credit report. Continuing to make on-time payments to credit card accounts will result in favorable references on your credit report. If you no longer have a credit card or have been turned down, consider a secured credit card. A secured card is guaranteed by deposits that a consumer makes to an account and can be used to help consumers rebuild their credit history.
In some cases, you may have been denied credit because you have an abundance of credit available to you. This means that when a lender considers the amount of available credit you have from credit cards, bank loans and other sources and compares it with your income, the numbers indicate that you likely cannot afford to take on any more debt.
At this point, you have several options:
- You can try to pay down or pay off some of the outstanding credit or loans that you have.
- You can review your credit report looking for "open" credit, gas or retail cards that you may no longer need or use. Call the store or card issuer and ask that the account be closed. "Open" accounts can count against you on a credit application because as long as the account is open, you have the ability to charge to that account.
- Review the credit limits you have on your various cards. If you have a higher credit card limit (for example, $5,000), but you rarely charge more than several hundred dollars to that credit card, you should consider asking the card issuer to reduce the credit limit on that card.
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