What should I do? This is the main question that keeps rushing through people’s minds after being denied loans because of bad credit. Many banks and financial institutions are built on the principle of lowering operational risks and optimizing profitability. Because of your poor credit score, denying you credit helps to keep risky parties away while encouraging them to build creditworthiness before they can return for a loan. Well, here are 4 most important things to do after getting denied credit.
- Avoid reapplying for another loan immediately
Once a financial institution denies you credit, ask yourself why? If the reason is a bad credit rating, other financial institutions will also check on your report and deny you a loan. Therefore, do not just apply for another loan whether in the same bank or a different one immediately.
Every time you re-apply for a loan (whether successful or not), the record goes on your credit report and affects the score. The more you apply, the poorer the credit score will be. This will make it even more difficult to get credit and other related services such as a phone contract.
- Check and correct your credit score report
Most lending institutions and other credit-offering companies such as phone companies providing mobile contracts refer to credit agencies to check the status of their clients. Once you are denied a loan, make sure to immediately check with the credit reference bureau for a credit report. The report will show the transactions that have made the credit score to be low.
Many are the times that credit scores do not give the right position of an individual because some information is wrong or missing altogether. For example, if you cleared a loan and the financial institution that loaned you delayed or forgot to submit a clearance report, the score will be low. Identify any error, omission, or misrepresentation in the report and correct them immediately to reflect the correct status.
- Start repaying and clearing your loans
Irrespective of how you look at it, the big issue in the room must be addressed! All the outstanding loans must be paid to help you get a higher score. If you have several credits such as mortgage, car insurance, credit card loan, overdraft, and other loans, work out a plan to clear them. Though many find it difficult, it is still possible. Review all the loans and renegotiate with the lender where possible to get the minimal amounts of payments to make every month. Then, take the extra cash and clear the loan that has the lowest balance and move on to the next. Within a very short time, you will end up clearing all the loans and enjoy high credit rating because you did so.
- Consider alternative bad credit loans
If you need cash urgently, think of alternative sources of loans while working on raising your credit score. Consider applying for a secured loan, payday loans, or borrowing from friends. However, you should be careful with these alternatives because the interest is very high and could easily sink you deeper into debt.