Reasons You May be Turned Down for an Auto Loan
Your credit score is an important factor in getting a car. It can be the determining factor between getting the car you want and getting the car you have to settle for. Cars are expensive, which is why most dealers offer some form of financing. There are even companies that will loan you the money to pay for your new vehicle.
While many of these places promise that you won’t be turned down for a loan, the truth is that there is a real chance that many might turn you down under the right conditions, no matter how positive the institution is. You can do something about them, but only if you know what’s going on. Here are reasons you may be turned down for an auto loan.
A Failing Credit History
The most common reason for being turned down for an auto loan is your credit score. If your credit score is very low, below 400, you are likely to be denied a loan on the basis that you have bad credit. Giving you credit is an investment for a company; companies will not invest in you if they think that you cannot meet your obligations.
A bad credit score shows you either have too much unmanageable credit or you have a history of not paying your bills. To fix this, you need to repair your credit before going to the loaner or dealership to give them a reason to trust that you are a good investment.
Red Flags in Your Credit History
Another common reason for being denied is that you have a red flag on your credit history report. You may have a decent credit history, but there are certain events that show you are a bad investment. Bankruptcy, lawsuits, foreclosures, liens, collections notices, and credit resets are all examples of red flags. They indicate that you had major financial issues, or are about to have them if any of these red flags are ongoing.
While you cannot remove these from your credit report, you can talk to the financer about them. They may excuse them if they know the details.
No Extra Income or No Credit, Whatsoever
A common reason for being denied a loan is that the loaner can tell you do not have any credit history or you cannot afford a loan. If the loaner looks at your credit and finances, it may determine that you are stretched to your limit and don’t have disposable income. This means you cannot make loan payments. Likewise, not having a credit history makes it difficult to determine if you should get a loan. In either case, the default answer is to deny the loan.
While it may be hard to take, you may not be qualified for a loan. If this is the case, then talk to the loaner that denied you. That organization can tell you why you were denied as well as how to make improvements. Remember, credit is fluid and you can always make your credit history better by taking positive actions.