A Good Credit Score Doesn’t Guarantee an Automatic Approval
Having pristine credit score makes it simpler for you to get approved for loans and credit cards with the best rates and terms. It’s a no-brainer. However, there are a number of factors that creditors take into account that aren’t part of your credit rating when determining whether or not you will be eligible.
Even people with a credit score solidly in the “excellent” or “exceptional” range of 600 or above could still get their loan application denied under certain circumstances. The following 5 reasons are why your loan could be denied even you have a perfect credit score.
1. Insufficient income
While your credit score doesn’t consider your income, many lenders still have minimum income requirements that you need to fulfil. Earning less than the minimum requirements shows that you may have difficulty repaying a new debt payment, posing a default risk to lenders. Even if you are just RM1 short of the minimum, you could still be rejected, regardless of your score.
2. High debt-to-income ratio (DTI)
A high debt-to-income ratio looks at how high your debt payments are compared to your income. Even with high income, your high monthly debt payments could indicate financial instability. For example, if your monthly repayments on existing housing, car, credit cards, or even student loans already polish off close to 50% of your monthly income, lenders may decide you already have too much debt to take on a new one. Different lenders use different ratios to determine their credit approval.
3. Employment history
A short or unstable employment history may come across deterrent to creditors. Some lenders must see that you’ve been consistently employed for at least 2 years and may want to verify your employment before approving your loan application. This is because lenders or other creditors worry that you will lose or quit your job and not be able to make payments.
4. Savings or cash assets
Lenders may want to see that you have savings or other cash available. Showing that you have money set aside assures lenders that you have the means to make your loan payment if an unexpected expense crops up. If you don’t have any of these, lenders will think twice before approving your loan or credit as they have to factor in unexpected situations where you might not be able to repay your debts.
5. Rapid accumulation of debt
How quickly your total debt has increased could also trigger a warning for banks. These signs can be detected if you have applied for credit many times in recent months, as banks might view this as unusually rapid debt accumulation. Taking on too much debt too fast also leads to the rejection of your application.
What Is Your Next Step If Your Application Get Rejected?
If your application is rejected, you must take steps to find out why it was denied. Nevertheless, being rejected does not mean you will never be able to apply for a loan again. It would help if you kept in mind that while your credit score is not the only factor that determines whether you qualify for a loan, there are other ways of applying. One of the best options is through private lenders like Avex Credit. They consider that many other factors affect your bad credit scores, not necessarily categorizing you as a risky borrower.
Still facing problems getting your loan to approve from your bank, and wondering what are other ways you can finance your business? Avex Credit’s doors always welcomes you! Talk to our advisor to find out if you’re eligible for a loan.
Avex Credit is a licensed money lender in Malaysia under the purview of the Ministry of Housing and Local Government and governed through Money Lenders Act 1951 and Money Lenders Act (Amended) 2003. We provide a variety of personal, mortgage and business loans that are tailored to meet your specific needs.