March 3, 2007, 11:06 am

What to do with declined cases (1st part)

by: admin    Category: Credit Rating & Credit Bureau
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After meeting with your banker and submitting an application for a new loan, the worst thing that can happen to you is to be declined. It is very frustrating. However, being turned down doesn’t mean being game over. There are several things to do in case of a declined file. Here are some tips to get your file approved.

Banks are usually very rational in their decision. Your banker will be able to provide additional information. The first step is to set up another meeting with him instead of accepting his decision over the phone. The first thing you have to ask yourself is: “Did I tell everything to this guy?” .If you didn’t, he probably found out by now and that reduces your chance of getting approved. A big part of the decision is based on trust, and you just ruined it!

Once you are with your banker, review your application to make sure the proper information was submitted. An incomplete balance sheet could lead to a hard decline without alternatives. Then, request a copy of your credit bureau for the same reason. You can refer to previous articles on the credit bureau to understand its structure.

Once this step is done, ask for the reasons of the declination. Several things can come up. Here are the most common:

– High debt ratio (TDSR)

– Low net worth compare to requested product

– Poor or recent credit history

– Bankruptcy

– Wrong product

– Recent employment or non stable income

Adding a co-applicant

It is obvious that nobody wants to call their parents and tell them:” Daddy, I can’t do my stuff on my own and I would like you to co-sign on my loan”. I must agree that it looks a bit loser ;-). On the other hand, you are better off to have your loan approved than being too proud and get in trouble. A strong co-applicant can compensate for almost every reason why you were declined. The more reasons the bank has, the strong your co-applicant must be. In some situation, a close friend or other relatives (brother, sister, etc.) might want to sign in order to help you out. It is really important that they understand they take full responsibility of the loan even if you are making the payment. In fact, if the loan is overdue, the bank has the right to go after the applicant or the co-applicant and sometime after both of them for the full amount of the loan. This is what we call being jointly responsible.

Adding up a co-applicant is not the only solution but surely is one of the most effective. With the help of relatives, you will be able to pursue your goal. In the case where you don’t have a co-applicant, other solutions might be offered. We will look at them in the next post.

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