Loan Denied? Here’s How to Get Back on Track


The most successful people in life learn from their failures — and lay the groundwork for success from them.

Take J.K Rowling, author of the Harry Potter books. A single mom who penned her first Potter book from a coffee shop while her baby slept nearby, Rowling saw 18 publishing houses reject her manuscript before she sold it. Or how about Thomas Edison, who first harnessed electricity via the light bulb, and invented the motion picture camera. He saw well over 1,000 patent ideas rejected.

That’s the mindset you need when you’re loan application has been rejected. Instead of lamenting your lot in life, you need to do what Rowling and Edison did and persevere.

The best medicine to take after a loan rejection is to get informed, know your credit situation, and open up a line of dialogue with your lender.

Action Step I: Contact your lender and ask for details on why your loan was rejected. The information they provide will give you a heads-up on what you need to do to fix the problem and get your loan approved. Then use that information to your benefit. For example, a lender may turn a home loan down because your income requirements fall a bit short. That could mean you’re over-reaching by going after a home you may not be able to afford. Ratcheting down your home expectations to fit your economic situation will then benefit you in the long run.

Action Step II: Focus on your problem. There is no shortage of reasons your loan may be rejected. Late payment and other credit matters, divorce, a job layoff or an illness can wreak havoc on a loan application. Find out what your specific problem is and focus on fixing that problem.

Action Step III: Check your credit status: Your credit score is also a big factor in getting rejected for a loan. Thus, getting a copy of your credit report is mandatory (you can get a free credit report once annually at Check your credit report error-laden entries, accounts that aren’t in your name, and outdated information. If you see any of the above, immediately contact your credit report agency and ask them to fix the problem.

Also . . .

  • Reach out to your creditors — Most creditors will remove negative credit data if you make a full or partial payment toward the debt.
  • Emphasize the good news – Check and see that the credit bureau has all the information that shows stability and your ability to make payments on time. For example, if you have long-term employment, make sure that fact is added to your credit file.
  • Emphasize your good name – Often people who are married have one spouse with serious financial problems. If so, make sure you establish credit in your name alone.
  • Take advantage of a second chance – Even though you’ve had some credit woes, you may be able to resurrect your good financial name by getting a new credit card, obtaining a secured loan or working with a local store to obtain credit on a purchase. By all means leverage a new credit opportunity – but be sure to make sure all of these payments are made in full and on time.
  • Pay up – There is no way to avoid it – if you have unpaid accounts listed against your credit history, you have to pay them back. Start paying regularly in any amount and work up from there.

Last Minute Tips – Don’t change jobs, if you can help it, during a loan process, especially if you’ve just been denied a loan. Lenders see job changes as potential red flags. 

Also, don’t open a new bank account (moving to a new bank can gum up the works and slow your loan approval process), and avoid making major purchases after re-applying for a loan. If you buy a new car, for example, the new monthly payment on your new wheels may tip the balance against you.

The Takeaway: Above all, don’t panic. Keep a clear head and start gathering the information you need to change your denied loan into an approved loan. You may not realize after having a loan denied, but turning a red light to green is easier than you think.

Posted in Finance
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