Reasons for Loan Application Rejection Despite Good Credit
An excellent credit score is important to get a loan or a credit card, especially when they are “unsecured”. However, there are times when a financial institution may reject an individual’s application even when they have a good credit score. It’s possible because of the following:
Credit Report Remarks
A credit report contains a lot of information- credit score, credit repayment history, current debt, bank accounts’ details, etc. However, banks or NBFCs may also leave specific remarks on these reports on the basis of their experience with an individual. For instance, if a borrower defaulted on a loan and had their loan “settled”, the bank may put a remark in his report which when looked upon by a future lender can compel them to reject their application.
Discrepancies or Mistakes
Identity thefts growing at an alarming rate today, which is why banks have become extra careful when checking credit reports. So, if they find any anomaly in the repayment history of an applicant, or a mismatch of personal details, bank account details, etc. they may find it suspicious and reject the loan application altogether.
A bank always wants their borrower to have a stable income. So, if the person changes their jobs frequently or if they have recently started a new business, their financial stability can be questionable and become a cause for concern leading to loan rejection.
If the loan applicant already has a huge debt on their shoulders and have applied for another big loan, then also the bank may reject their application reckoning a high possibility of loan defaulting.
Short Credit History
Usually, if a person has a long credit history, they are able to get a loan easily. However, when their credit history is short (less than a year, for instance), then it can be difficult for a bank to count on them easily and they may reject their loan application.