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Rejected Despite Great Credit?

Date: March 15, 2017      Publication: Bottom Line Personal      Source:  John Ulzheimer      Print:

People who have excellent credit scores—750 or above—might assume that they can land any credit card or reasonable loan they apply for. But sometimes a stellar score is not enough. These problems still could derail your ­application…

Insufficient income. You might be rejected for a mortgage or loan (or not be offered the best rates) if your “debt to income” ratio (monthly debt obligations divided by gross monthly income) exceeds 30%. Or a lack of verifiable income could cause a credit card application rejection.

Low appraisal. Issuers of “secured” loans, including mortgages and auto loans, often reject an application if the value of the asset used to secure the loan does not comfortably exceed the amount of the loan.

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You churn through credit cards. Examples: You repeatedly move debt from one card to the next to take advantage of 0% introductory balance-transfer ­interest rates. Or you repeatedly sign up for cards to snare up-front rewards—but soon stop using those cards.

You have discharged a debt to the lender through bankruptcy. All mention of a bankruptcy should disappear from your credit reports within 10 years—but if a lender lost money because of your bankruptcy, it might never lend money to you again.

You have a very limited credit history. It’s possible to achieve a credit score in the mid-to-high 700s after just a year or two of using credit, but some lenders and card issuers insist on a longer history of responsible credit use.

One of your credit scores isn’t as high as the others. There could be a problem lurking in your file with the credit-reporting agency that the lender uses even when the other agencies assign you excellent scores.

What to do if your loan application is rejected: You always can apply to other lenders or card issuers, of course, and with your excellent credit score, there’s a good chance that one of them will approve your application. But to avoid rejections in the future, obtain a free copy of your credit report from all three major credit bureaus through AnnualCreditReport.com, and check each for errors that could be dragging down one score but not the others.

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Source: John Ulzheimer, president of The Ulzheimer Group, Atlanta, which offers consulting services related to the Fair Credit Reporting Act. JohnUlzheimer.com