6 Reasons People With 700+ Credit Scores Still Get Rejected
When a person thinks about getting a car loan or a credit card, they look at their credit score and, if it’s sufficiently high, they believe being granted credit will be simple, that banks and other lenders would be tripping over themselves to issue a loan or line of credit or credit card. But that’s not always the case. When a bank processes a credit application, there are many more factors than just a credit score to consider.
Many of the reasons a person with an over 700 credit score could be rejected usually has something to do with what is called the Five C’s of Credit: Character, Capacity, Capital, Conditions, and Collateral.
- The ability to pay back a loan.
This would fall under Capacity. When a bank takes an application, they not only look at your credit score, but also your ability to pay back that loan. If you are trying to take out a $10,000 loan over a 36 months period, but are only working part-time, the bank would consider you a bad risk for defaulting on a loan.
- You might have too much debt.
Again, this would be a Capacity issue. The bank may look at your current debt, figure out your debt to income ratio, and decide that you are barely making the payments to which you are currently obligated. In this instance, a way to possibly gain approval for a loan would be to prove that you intend to use a loan to pay off a loan, or series of loans and credit cards, so that in the end you would be paying less each month or otherwise gain from the deal.
- The car is too old.
When underwriters are considering a vehicle loan, they look at the age of the vehicle, the mileage, and how well the vehicle holds its value. Each bank has different values they look for in a vehicle before approving a vehicle purchase loan. They have to make sure the vehicle is in a condition that could be easily resold if it had to repossess the vehicle. Similarly, the bank does not want to be in a position to own a vehicle that will soon cease to function.
- Ghosts from the past.
Your credit may be excellent now, but what was it like in the past seven to ten years? If you have a bankruptcy or other derogatory item in your credit report, it may be difficult to get credit, even if you have cleaned up your act and have managed to rebuild your credit.
- Which credit bureau is being used?
There are three credit bureaus: Experian, Equifax, and Transunion. Each of the three typically has a different, yet very close number, for each person’s credit score. You may have a 700 credit score with Equifax, but a 690 with Transunion. When applying for credit, ask the lender which of the three bureaus they use. Some lenders use only one bureau. Others use each lender for different types of credit applications.
- Is your credit frozen?
This happens often. A person buys a car, a house, and gets a credit card, believing themselves set, they freeze their credit so they cannot be taken advantage of by hackers or other evildoers. While this is a great tactic, over years a person can forget they froze their credit. So, when they retire and want to buy that sailboat they’ve been eyeing, they are shocked to find they’re not approved. “But I have excellent credit and a large down payment!” they may bark, but when it comes down to it, all they have to do is make a short phone call to each of the credit bureaus when they need their credit checked for this loan, and then if they want to re-freeze their credit, another phone call is made.