Denied Credit Again? Here’s Why And What To Do Next

Share this link:

You have a job. You’ve never filed bankruptcy. You’ve lived at the same location for over two years. Isn’t that what creditors look for when you submit a loan or credit application? With credit denials stacking up, you’re wondering if there’s more to the credit approval process than what your well-meaning friends told you.

If you were recently denied credit, the potential creditor usually provides you with a written notification of the denial, including reasons contributing to the rejection within 10 days. This notification called an “adverse action letter” removes some of the mystery that often surrounds credit denials and helps protect against unlawful discrimination. It’s easy to disregard the letter if you weren’t expecting it, so don’t worry if you threw prior letters in the trash. While you wait for your next letter to arrive, review these common reasons for credit denials and figure out what you can do to turn your financial situation around.

Why Credit Denials Are Your New Norm

Potential creditors are most concerned about your ability to repay the credit obligation as agreed. If you can demonstrate this to a creditor, then you are seen as a reasonable credit risk. If not, then creditors will either deny credit or extend credit at higher interest rates with less than favorable terms. While every financial situation is unique, here are common reasons for credit denials:

Little or No Credit History – The credit applicant hasn’t yet demonstrated an ability to repay debt.

Late Payments – While one late payment can bruise your credit health, it’s the consecutive late payments that put you on the track to a credit denial.

High Debt to Income Ratio – Your repayment history isn’t the only thing under review when you apply for credit. If your income isn’t able to support additional debt, then you’ll likely be denied credit.

Here’s What to Do About It

It takes months to repair your credit, but the effort is worth it. Avoid credit repair services that claim to wipe your credit clean and give you a fresh start. Credit repair scams like this make false promises and often encourage consumers to provide incorrect information to potential creditors. You can put an end to repeat credit denials on your own. Here’s how.

First, order copies of your credit history reports.

After a credit denial, you’ll receive an adverse action letter which describes the reasons for the denial and the steps to take to order a free copy of your credit report. Your free report will be from the credit reporting bureau used by that particular creditor. However, you must obtain a copy of your credit history report from all three major credit reporting bureaus: Equifax, Experian, and TransUnion. Creditors are not required to report credit activity to all of the bureaus so information that might appear on one report may not appear on another. Potential creditors choose which credit reporting bureau they will use to pull your credit history.

Request a copy of each credit history report for free at

Next, review each credit history report for errors.

You have the legal right to dispute inaccuracies on your credit report. Follow the dispute policies of each bureau to resolve each error. Examples of credit history report errors that can harm your credit include:

  • Past due or delinquent account statuses
  • Incorrect names, employers, addresses
  • Accounts that you’ve never owned

Review your credit history reports, at least annually, to ensure they are accurate.

Then, if everything is accurate or disputes have been resolved, work on rebuilding your credit.

Repairing your credit takes time, but it can be done. The two most important factors affecting your credit health are your history of paying your accounts as agreed and keeping your account balances far from the credit limit.

Catch up on any past due accounts and make all of your payments on time. Pay down your debt obligations and keep credit low. Calculate your debt to income ratio and aim to keep it under 36 percent.

Finally, obtain a secured credit card or secured loan (if needed).

Whether you have bad credit or no credit, you must demonstrate to future creditors that you can repay financial obligations as agreed. A simple way to do so while avoiding the risk of another credit denial is to obtain a secured credit card or secured loan. The balance in your savings account makes these credit options possible regardless of your credit health. As with unsecured credit cards and loans, your repayment history is reported to at least one of the major credit reporting bureaus.

When you improve your credit, you can gain access to life experiences that may have been out of reach due to financial limitations. If you’d like professional guidance building or rebuilding good credit, contact our non-profit partners at GreenPath Financial Wellness. Contact them today for a free debt counseling session!



Written by Freelance Personal Finance Writer, Tracy Scott