Thursday 26 April 2018

What you can do if you are turned down for a loan

Why might you be turned down for a bank or credit union loan and what can you do about it?

Get an explanation

If you are refused a loan, it may be because the lender believes that the risk you will not be able to repay it is too high. You may disagree but you can ask your lender to explain why, although they don't have to tell you.

Incomplete documentation

It may well be something as simple as the paperwork. "It is possible that the documentation you provided was incomplete, in which case you should review what was required for the application process and possibly try again," says Kevin Johnston, CEO of the Credit Union Development Association.

Poor credit rating

A more likely explanation is simply that you have a poor credit history or a low credit "score".

When you apply for a loan, lenders may check your credit history, usually with the Irish Credit Bureau (ICB), to find out how likely you are to repay the loan.

Most lenders send information about its borrowers and their loan repayments to the ICB, which keeps a credit history file of each borrower on its database, as well as a credit score.

This is basically a lender's way of quickly establishing your lending risk. These scores range from 330 (lowest) to 550 (highest). If your credit score is low, you can take steps to repair your rating and reapproach a lender in a year or two.

Financial capacity

However, even if you have never borrowed a penny or have always repaid loans on time, lenders may conclude that you simply don't have the financial capacity to comfortably repay the loan, based on your declared income.

Irish Independent

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