Rejected for a Loan and Didn’t Know Why…
Have you ever been declined for a loan and nobody could explain why?
You have a good income and a decent credit score, but that didn’t seem to matter.
If you just apply again you risk damaging your credit score, but you still need that loan.
This is the situation our customer of the week found themselves in, and by the time they came to us they had multiple unsuccessful applications with no explanation from their previous broker.
And the problem had nothing to do with their income or their credit history.
The reason was actually very easy to spot if you knew what to look for.
Scenario
A customer came to us from Woodridge, in the south of Brisbane, looking to secure a $30,000 vehicle loan.
She had already been to other brokers and had only achieved multiple loan rejections despite a credit score of just over 600 and earning a good income.
The previous broker would not explain to her why she was being declined, so she didn’t know what she could do to improve her situation.
By the time she reached out to the Gusto team, she had accumulated five separate credit enquiries on her file from other brokers who were just hoping for a result.
Which really annoyed us, to be honest. This approach can do a lot of damage and leave people worse off than doing nothing.
The Roadblocks
Our team started by conducting a thorough review of her financial situation to diagnose the problem.
We quickly found a few potential issues in her bank statements. These included:
- Rapid Account Depletion: The majority of her income was routinely paid out to various expenses on payday. To a lender, this can be a sign you are not ready to take on an additional loan payment.
- Dishonours: She also had a recent direct debit dishonour on her statements.
These issues, in addition to the five recent credit enquiries, presented a significant challenge to overcome in the short term.
The Gusto Strategy
The good thing with bank statement issues is you can solve them in less than 90 days.
We were able to fully explain the issues to the customer so she could take the corrective action and be eligible again in the near future.
We often send customers away with this kind of information, and they return once the improvements are made.
However, the customer (and her husband) needed an outcome now.
So, the other option was for the husband to step in and be the primary borrower.
He had a fantastic comprehensive credit score over 800, only one credit enquiry, and hadn’t taken out a loan in a long time.
Because his credit profile was so strong, we knew we could take the application to a top-tier lender that wouldn’t require bank statements at all as part of their credit assessment process.
The Result
The application was approved with a competitive interest rate of 10.7%. But there was one curveball still to come.
Once we secured the approval, the customer found a vehicle they loved that was above the original loan amount: a 2023 Nissan Navara priced at $36,000.
The good news was the borrowing capacity was comfortably there, and we had the increased loan amount approved without a hitch.
The loan settled shortly after, and the customers were absolutely thrilled to finally pick up their new Navara.
The Takeaway
A good credit score is only one part of the puzzle. How you manage your everyday bank accounts can be the difference between an instant approval and an automatic decline.
If you get rejected for a loan, never let a broker simply submit it somewhere else without understanding exactly why the first lender said no.
You must either solve the problem or apply to a lender that has a more tolerant policy towards that specific issue.
If you have dealt with a broker who doesn’t take these steps, and doesn’t educate you on what you need to improve, then I am sure you understand the difference (and the potential consequences) only too well.