Was your auto loan application denied? Don’t fret. You aren’t the only Okie to deal with this problem. Don’t rush into another application after you receive the bad news. There is a right way to proceed after an auto loan denial, and the steps are found below.
Know why you were denied
There are many reasons why an auto loan gets denied. If yours got denied, find out the reason (or reasons). If the lender doesn’t offer the reason (or reasons), be sure to ask. You will not get approved if you don’t figure out why you got declined the first time.
Credit is often the reason behind a loan declination. Either you have bad credit or no credit at all. Though many lenders, including banks, are more lenient with their credit requirements these days, there are still some that prefer to cater to those with good to excellent credit. If the absence or lack of credit history isn’t the problem, there are several other issues to consider, including too many credit inquiries and/or outstanding loans.
It doesn’t matter what the reason is—what matters is that you learn exactly why you weren’t granted that loan. Knowing the reason is the only way you can proceed to the next step.
Address the problem
Once you determine why your auto loan application was denied, it is time to set things right. Now that you know exactly what is holding you back, you can make the changes that will help guarantee loan approval in the future.
If no credit is the problem, start building it. Get your credit report to find out your current credit situation and start improving it. Begin by getting a secured credit card, one that reports all transactions to the three credit bureaus: Equifax, Experian and TransUnion. Use it to make small purchases and pay off the entire amount when it is due. Once you’ve learned how to use credit responsibly through the card, get an unsecured credit card to strengthen your history. Don’t forget to pay your bills on time.
Burdened with bad credit? Start repairing your credit now. If money always seems to be lacking, make lifestyle changes to stretch your dollar. Pay off debts with the additional money you have saved from making lifestyle changes. If possible, refrain from using credit cards or making use of other types of credit until you have eliminated existing debts. Before making a purchase, consider if it is a need or want; buy only if it is the former.
If your credit is affected by incorrect information on your report, dispute the errors. Write a letter to the credit bureau and send it with a copy of your credit report. Make sure to highlight the errors in the copy you are sending. Explain why the highlighted portion is erroneous.
You should also save money for a down payment. This will help increase your chances to get approved the next time you apply. If you already have some money for a down payment, save more money to increase the amount. The bigger the down payment, the more likely the auto loan will be approved.
After you address the problem or problems that prevented you from obtaining an auto loan, it is time to try again. Before you apply, check your credit report and see if your efforts are reflected there. When you do shop for another auto loan, limit applications within a two-week period; doing this will make your credit inquiries be counted as one instead of several, preventing your credit score from dropping by a few points.