When your application for credit gets turned down because of bad credit score, many start wondering what the next best things to do are. Bad credit is used by banks to identify high-risk parties and deny them loans to avoid loss. However, many people have risen from bad credit to become very successful. Here are four most important things to do after being denied a loan because of bad credit.
• Do not apply for another loan immediately
Just like the first bank denied you a loan, other institutions use the same process and will not lend you. Applying for another loan immediately is even more harmful to your credit score. Every time you apply for a loan in a bank, the transaction is captured by credit reference agencies lowering your score even further. This could diminish chances of getting other financial and related services to phone credit.
• Get your credit report and correct all errors
While the main reference about your credit score is reference agencies, many are the times when they have errors. This is because the info they use is gathered from third parties. In case a third party delayed or failed to remit loan clearance reports, the chances are that your score will be full of errors. By getting the report, you can get all the disparities and have them corrected to reflect the appropriate reading. Indeed, it is advisable to correct these errors before considering applying for a loan in any financial institution.
• Seek assistance on cutting credit card debts
Credit card debts can easily shoot up because their interests are usually very high. However, people can learn how to cut the debt, lower the interest rates, and raise credit score by seeking advice from experts at “A New You” about their debt reduction how-to post. During our holiday at the onset of summer, my workmate, John told me how he had sunk into credit card debt that pulled down his credit score. Through assistance by professionals from “A New You”, he was able to clear the debts, raise credit score, and can now get any loan he wants.
• Work on clearing all your loans
One fact that every person must live with is that credit agencies and credit score reviews are part of the current lifestyle. Therefore, it is critical to start working on all contingencies that could have brought down the score. One of the main contingencies is outstanding loans. Many people end up with multiple loans such as overdrafts, credit card loans, mortgage, and bank loans that pull the credit score down all the time. How can you address these loans?
To clear the loans, talk to the lenders to establish the required minimum monthly payments for each. Then, get the extra money (balance between lowest and highest payments) and use it to clear the loan that has the least balance. Within a very short time, all the loans will be fully cleared.
You might also consider loan consolidation which involves getting one loan to clear all other loans and dealing with a single lender. This option is very helpful especially if you have credit card loans and overdrafts that attract high-interest rates. You only deal with one lender (consolidated lender), get lower interest rates, and can be allowed to pay for a longer period.
• Identify alternative sources of cash
Even though the bank declined to give you a loan, there are many alternatives for getting cash. You can go for secured loans using the car or home as collateral because the risk to the bank is very low. Other options include payday loans, logbook loans, and borrowing from friends. Remember that most of these alternatives have very high-interest rates.