I’ve Been Declined Credit, What Should I Do Now?

You are waiting patiently for the salesman to come back from the finance office, trembling in your shoes. He comes back and says, “we have to decline your loan today.”  OUCH!!  What should you do now? Crawl in a hole?  Hope everything will get better on its own?

How long will it take before a loan can be approved?  How far off was I?  These are good questions but the answers are going to be very different for everyone who has been on the wrong end of a credit declination.

There could be many reasons as to why your loan was declined but we all know that credit reports and scores are the primary reason for denials.  If you were declined because of poor payment history on your credit reports then you need to look at the following (after you’ve gotten your free credit report, which is your right if you’ve been denied):

Are the late payments accurate, meaning did you REALLY not make your payment on time?

Are the public records accurate?

Are the negative items really yours, or do they belong to someone else (fraud or mixed files)

If the negative credit items are accurate and the lender refuses to remove them, you will need to just wait because time will be your friend.  The effect of a late payment on your credit scores will get less and less the farther away from the incident you get.  Credit scores like to see many months of clean credit, meaning no late payments, before your scores will improve.  This is not a hard and fast rule but a good rule of thumb to go by.  If you know you have been late on a payment in the past 12 months you should really take this into consideration when applying for anything new because it’s going to cost you more to finance most anything.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.