If your loan application is declined the creditor must provide you with a “notice of adverse action” letter that includes the following provisions:
- Provides “reason codes” to explain why your application was declined,
- Discloses the source of information used in its decision,
- Specifies how to obtain your credit report, and
- Informs you of your right to dispute inaccurate information in the reports.
When Can You Apply Again After A Loan Rejection?
You can reapply after 72 hours of receiving the notice of adverse action. However, another attempt is all but guaranteed to fail unless the issues outlined in the notice are resolved before reapplying.
This can be done by analyzing various aspects of your financial profile, including:
- Assessing your debt and income,
- Examining your credit reports,
- Fixing errors in your credit report, or
- Talking to your lender for clarification.
Applying for many loans in a short period of time could harm your credit score and suggest that you are a “high risk borrower”.
Why Was Your Loan Rejected?
Creditors consider a number of factors, including:
- Bank account balance is low on average or frequently a negative balance,
- Minimum requirement of $750 a month in income has not been met,
- Consistent payroll deposits cannot be detected (at least 2-month period),
- Numerous returned checks or insufficient funds fees are identified,
- Multiple loans exist with other lenders,
- Identity cannot be verified with identification information supplied,
- Applicant is an active military member or a family member of one,
- State regulation prevents lender from approving the applicant,
- Shared bank account with an individual who already has an active loan,
- A duplicate account is identified and must be removed before proceeding,
- Unable to obtain data from applicant’s bank account to make a loan decision,
- Bad or non-existent credit,
- High debt to income ratio, and
- Insufficient or unverifiable income.
You can reapply for a loan declined by a lender 3 days after the initial application was denied. Resolving the issues cited by the lender as best as you can before reapplying. This will make you a better loan candidate and increase the probability of future applications being approved.