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Top Reasons Why Your Loan Application is Denied

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It could be very hurtful to get denied a major loan especially when you need it most. Before you even try applying, read this guide to know which factors might cost you your loan application so you can fix them as early as now.

Income or Employment Changes

If you just lost your job, it’s almost a guaranteed denial. However, there are other reasons for your loan application to be denied which are related to your employment, such as losing a second job, salary deductions, less commissions from sales, and any other changes in income that can make you appear financially unstable for the loan you’re applying for.

Too Many Loans

Having too many outstanding loans might reflect negatively on you and you might be deemed as a risky borrower. Lenders may see that you are either overstretched or have plans on defaulting on your debts anytime soon.

Very Few Loans

On the other hand, very few outstanding loans can also get your credit application denied. Although you can avoid the danger of taking on too much debt than you can handle, this does not give you much experience on handling several types of debt. Whenever you’re applying for a loan, lenders would like to see the different mixes of credit that you have on your file. Aside from keeping a few credit cards, it helps to have outstanding mortgage or auto loans on your credit history. Keep in mind though to only apply for credits that you really need and not for the sole purpose of giving your credit score a boost.

Your Credit Cards are Maxed Out

When you max out your credit cards, not only does it hurt your credit utilization, which is a strong determining factor on your credit score, but lenders will see it as a bad sign. Even if you pay timely, your loan application can still denied if you have maxed out revolving credits. To stay on the safe level, be sure to keep your balances within ten to thirty percent of your credit limit.

Insufficient Documents

Aside from your credit report, creditors would like to see supporting documents for your loan application, such as bank statements, pay stubs, tax information, job confirmation from your employer, and others. Your application can be denied if you failed to submit these documents on time.


If there’s any false information in your application, whether submitted intentionally or by mistake, this can easily terminate your application. What’s worse, you might face charges for committing fraud, and providing information in error is not a good enough excuse. If there’s any information which you are unsure of, such as past employment dates or your exact income, don’t just guess them and wait for the confirmation from your employer.

Activities After Application

Your lenders won’t stop monitoring your actions after you’ve been awarded the loan. In fact, the company’s underwriters will watch out for suspicious activities such as suddenly closing lines of credit, transferring money between accounts, or applying for more credit.

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