Five Most Common Reasons You'll Be Denied Credit-6

There are various reasons that a lender will deny credit. The most
common reasons are the five that follow.

1. The primary reason that credit is denied is that the applicant
has a history of late payments, bad debts, or legal judgments.
Failure to treat credit responsibility in the past is seen as
unequivacable evidence that you will likely default on a loan.
2. The second largest reason for the denial of credit is the
applicant submitted an incomplete application. This also
includes the incidents of discrepancies between the
information on your application and in your credit report, such
as total debt or different addresses.
3. The applicant has too much debt when weighed against their
income. Lenders will want to see an applicant that has a good
balance between their income and their debt.
4. The forth largest reason why lenders deny credit is due to one
of the reasons listed above...but it’s an error in the credit file!
It is said that one in four credit reports contain factual errors
that could lead to a denial of credit.
5. The final reason that credit is denied is for insufficient credit
history. Either the applicant has no previous credit file, or
credit that is too young with too few accounts. Lenders
consider people without a track record of responsibility to be
too much of a risk.

Many other people sink into a credit crisis because of a temporary
hardship. Perhaps they had a layoff from their job, or prolonged
hospitalization of themselves or a loved one which caused a temporary
strain on their budget. Perhaps a distaster struck their underinsured
home. For these individuals, fixing the problem means finding ways to
provide a safety net for themselves in the event of more bad luck.
Insurance, cash reserves and passive income streams will help.

A good rule of thumb is to set aside three to six months of living
expenses in a cash account to cover these setbacks. Next blogpost on
Finacial Planning will tell you how to create a cushion to ensure heathy
credit when your personal economy falters.

Tomorrow I'll discuss about credit rejuvination.