Why was my credit application declined?
Has your credit application been denied? Do you know why? Here’s a list of possible reasons why your credit application was declined.
terms of the National
Credit Act (No 34 of 2005), credit providers are required to carry out
rigorous checks on consumers applying for credit to promote responsible credit
granting and use and to prohibit reckless credit granting.
can be a number of reasons for applications for credit being declined.
The most common reasons for being denied credit are:
- You have a
limited credit history – Your credit application could be denied if
you’ve never had credit before or if you don’t have much experience with
credit. When you apply for a loan, lenders look at your borrowing history
listed on your credit reports at credit bureaus. Having a credit history of positive
and consistent payment behaviour is a good indication that you are credit
- Not enough
– Lenders need to ensure that you’re able to make the minimum monthly payments
before they approve your loan. Most lenders use a debt to income ratio to see
if you can handle the payments if your loan is approved. They compare how much
you earn each month to how much you spend on monthly expenses and other debt
repayments. If you’re unable to afford the new debt, they will decline your
- You have a judgment
or other legal notices against your name – Serious
delinquencies are a sign to the lenders that you don’t have enough money to
meet your financial obligations. It’s important to prevent this by ensuring you
pay your instalments in full and on time and if you’re in arrears, catch up as
soon as possible.
- If you have
negative or adverse bureau information on your credit report – Adverse
information, such as late payments or defaults, indicates to lenders that you
may not be able to pay your debt back responsibly. The lender may find you do
not meet their requirements and decline your application.
- A lender may
have additional requirements – Your credit score and credit report are not
the only factor lenders take into consideration assessing your application.
They often their own additional business rules that apply.
Other reasons for applications being declined:
- Sometimes mortgage loans aren’t granted because
the bank appraises the property you want to buy at a lower value than the loan
you are applying for.
- Balances on existing loans may be too high.
- Credit card balances may be too high.
- You may have too many enquiries on your credit
report. Applying for too many credit cards and loans within a short period of
time could look risky to lenders.
- Your application is missing vital information,
for instance, your date of birth or residential address.
- Recent changes in your circumstances. If you
have recently moved or changed jobs and haven’t notified all your creditors,
the lender you are approaching for credit won’t be able to verify the
information you provide.
- You don’t have an income or regular income.
occasion, the list of criteria could mean that even applications by seemingly
creditworthy consumers will be turned down. If your application for
credit is denied, you have the right to ask the lender why it was declined.
Make sure your credit report is in order by going to www.mycreditcheck.co.za to get your full free credit report.