The following is a guest post by Kostas Chiotis. If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.
Unless you have perfect credit, you’ve likely been on the receiving end of some of the most difficult words that there are to hear – you’re denied credit. Credit companies have very stringent rules that they follow to determine who they extend credit to. If you’re credit rating is not up to their rigorous par, it’s highly likely that you’ll be forced to rethink your financial strategy. As a smart consumer, being denied credit shouldn’t be the end of the road but instead the beginning of the path to improvement.
Find Out Why You Were Denied Credit
According to the Equal Credit Opportunity Act, creditors are required to inform you as to why your application was rejected. This notice comes in the mail, sent to the address you applied for the credit with. There are a number of different reasons that you could be denied credit for, including:
- Credit usage too high
- Too many previous delinquencies
- Too many lines of credit
- Little or no credit history
- Too many credit inquiries
By taking advantage of the information that the credit company provides, you can more easily understand where the problem with your credit is so that you can take action to fix it.
Another opportunity that you can take advantage of if your credit request was denied is to obtain a free credit report. Applicants who are denied credit are eligible for a free copy of the credit history to ensure that there are no mistakes which could be unjustly affecting their credit rating.
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Take A Careful Look At Your Credit Profile
By obtaining your credit report, you are able to take an in-depth look into what the credit companies are seeing, and what negative items they’re seeing that is causing you to be denied credit.
There are six different areas of your credit report:
- Personal Information
- Summary of Accounts
- Account History
- Public Information
- Creditor Contacts
Each part of the report can affect how creditors score you and should be given a thorough examination. Oftentimes, erroneous charges and delinquencies can find their way onto even a responsible consumer’s report, making a strong case for verifying all of your credit profile’s details.
Another benefit of looking over your credit profile is the fact that you can check of omissions as well. While having an extra item on your report can be bad, having positive items and payments missing can be worse. This is especially the case for consumers with little to no credit – any small thing, even utility bills and phone payments, can be beneficial to obtaining credit in the future.
Easy Ways To Improve Your Credit Score
Although your credit score is not something that can be swayed one way or the other overnight, with dedication to improvement it can often be brought up in a relatively short amount of time.
Everyone’s credit profile is going to be different and have their own deficiencies and areas which need improvement. By utilizing your reasons for being denied credit alongside of your credit report, you can easily create a game plan for raising your credit rating.
Here are a few of the easiest ways in general to improve your profile and raise your score:
- Keep your credit card balances low compared to your total available credit.
- Pay down your smallest accounts first – this approach to reducing debt provides a feeling of accomplishment by eliminating a larger number of accounts as opposed to one larger one off the bat.
- Keep your oldest accounts open – the age of your accounts plays an important part of your report.
- Apply for a secured credit card which will help you build credit.
- Ensure that 100% of your payments are made on time.
Regardless of whether you were applying for credit in order to purchase a vehicle, obtain a credit card or fund a new business, being denied credit can stop your plans dead in their tracks. Luckily, improving your credit rating is not impossible. With a commitment to improvement, and be utilizing resources like free credit reports, turning your financial situation around is an obtainable goal in nearly all situations.