Nothing stings worse than being turned down for a loan or credit card. You thought you’d be driving that new car, or even moving into that lovely home, and that rejection feels like a slap in the face. It’s embarrassing, too, and often there’s no reason for it. With a little planning, you can raise the chance of approval for your credit application. Just follow these three simple steps:
1) If you have some late payments on your record, wait a few months to apply for credit. For six months or more, make every single payment on time. More than a third of your FICO credit score is based directly on your payment history, so even a few late payments can earn you a rejection. It’s worth the wait to rebuild a string of on-time payments so you look like a better credit risk.
2) Get a copy of your credit report before you apply for any new credit. Federal law entitles you to a free copy from the three credit bureaus once a year from www.annualcreditreport.com. You only need to order one copy to prepare for your credit application. Scour the report, looking for anything negative that could hurt your chance for approval. If you find negative items, determine whether they’re legitimate or whether there’s some mistake.
Credit bureaus make big errors, like putting the wrong accounts on the wrong credit reports. Obviously, having negative accounts on your record that belong to someone else will get your application denied, so you need to dispute them immediately.
However, you might find some negative information that’s technically correct but that still contains a mistake. Maybe the date is wrong, or the payment amounts aren’t correct. Maybe the creditor’s name is misspelled. It doesn’t matter if the error is minor. You’re still allowed to dispute it. If the creditor doesn’t confirm the information, it gets erased from your credit report. If you catch enough of these little mistakes, you can improve your credit substantially and raise your chance for new credit approval.
3) Proofread your credit application. It may sound silly, but many credit applications are denied simply because the people filling them out make mistakes. A wrong date or address or other piece of data can mean the difference between a new line of credit and a “no,” so proofread before you turn in that application. It’s easier than you think to transpose digits in your Social Security number or make a typo in your employer’s name or address when you’re filling out an application online, or even when you’re writing it by hand. If someone else is filling out the application for you, like a bank officer or loan agent, insist on checking everything over before it gets turned in.
These three steps are easy, yet they can make all the difference in how your loan application turns out. Follow them every time you apply for new credit and your chance of success will go up.