In our current economic environment, loan rejections are at record highs! This includes all spectrums of credit. Car loans, Mortgages, credit cards, and credit card limit increases. The current rejection rates for applicants stand at 21.8%. This is the highest rejection rate since June 2018. Those with 680 credit score or below are being hit the hardest in these difficult times.
Since the Fed started raising interest rates over a year ago, in an attempt to tamper our historic inflation, they have raised the interest rate with 10 consecutive hikes. This is meant to discourage spending and to tame inflation. But, by doing this, it has also hampered “normal” business. Banks tend to really tighten their belts when it comes to accepting loan applications when the Fed acts in this manner. Knowing this, the banks are clearly seeking to find the highest quality candidate they can find to approve loans. This is precisely why your credit score has never been more important.
If you are below a 680, how can you help get your scores up in order to better your chances of not being rejected when applying for credit?
The one thing you can do yourself is to make sure the amount owed on your credit cards are, at minimum, only 30% of your overall credit limit. According to FICO the best scoring comes when that ratio is at 10% or below of credit utilization. If you have been a long-standing card holder with a great payment history, you could always ask for a credit line increase in order to bring down the utilization ratio as well. If you happen to use your credit card for large purchases, but you pay them off every month… be sure you know WHEN the credit card company sends their data to the Credit Bureaus. Even though you pay those cards off every month, you may not be paying them before the credit card company reports. Therefore, it looks like you have a very high, running, credit ratio balance.
There are always other ways to improve your scores. Do you have a credit monitoring service? Do you check your credit report regularly? If the answer is no, I would strongly advise checking that once a month. Are there negative items in your report that don’t appear to be yours or reporting incorrectly? If you do, challenge the validity of those items reporting with the Bureaus. It is a time-consuming process. Many consumers choose to use an expert in this field to assist in this process. If you find you need assistance in this process, please don’t hesitate to contact us.
Anything you can do now to improve your credit scores will only enhance your future ability to receive financing. Don’t hesitate. Experts believe we are not at the end of the rise in interest rates. That’s only going to make that much more tough for consumers to be accepted for financing rather than be rejected.
Credit Law Center – 1-800-994-3070
