Remember the time you went to a bookstore? You were surrounded by millions of books and magazines. Your intention was to buy one, maybe two or three books about a general subject. You go to the Subject section and now … you must choose. Hmmmm.
How did you choose?
Was it the cover?
Was it the Title?
Was it the Author?
Did someone refer you to a specific book?
Generally, most book buying consumers look at the cover, then the title to determine if they are going to pick up the book to read the book summary on the back, open it to read the table of contents or a few paragraphs of the 1st chapter.
Ironically, this is how most financial institutions make their judgmental decisions to approve or decline a loan request. Right, wrong or indifferent, the Credit Score is the “Title” to the story that is in your credit report, the “Book.”
If the Credit Score (title of the book) is “attractive,” aka good credit, the lender will look at the credit report based on the loan request (read the table of contents or begin reading the book). If the lender likes what they see (the request and credit is within their lending policies and guidelines), they approve the loan (buy the book).
If the Credit Score (title of the book) is “unattractive,” aka bad credit, the lender will deny the loan request (put the book back on the shelf).
Although, not all lenders may be this cut and dry, most DO base their credit request decisions based on the credit score.
Have you ever missed out on an awesome book because it had a horrible title or crappy cover?
It was only when friends, family, or Oprah said that the book was a Must Read that you decided to check it out.
Have you ever missed out on an awesome relationship with someone because they did not fit your desired requirements, physically?
It was only when they married someone else and you later found out that they were a millionaire and wanted to take care of you — for life.
Ok, maybe that one is a stretch, but you get my point.
Lenders may be missing out on wonderful customers who may have a very low credit score and “colorful” credit, but may be a less credit risk because they now have a job or a better job and are willing to do automatic payments (using payroll deduction or direct deposit) to pay on their loan to re-establish their credit.
Yes. There are many people with low credit scores because they were negligent with their credit and intentionally had no intent to pay. These people are DIFFERENT and I’ll deal with them in another article.
We’re focusing on people who low credit scores because of an unfortunate, unforeseen and unexpected life interruption, like medical expenses, being laid off, furloughed, divorced, etc. When they are finally getting back on their feet, they may need a loan. And, they have a Story.
For these individuals who have a willingness to pay and desire to reestablish their credit, here are a few helpful hints when your loan request has been denied due to your credit score:
Ask for Specific Reasons why you were denied.
You will get a standard letter with 1 to 3 denial reasons. Call the lender to get specifics as to why your loan request was denied.
For example: You applied for an auto loan, but there is a recent Repossession on your credit report. The lender, may not want to take the risk of you defaulting on the auto loan with them? As a consumer with a story, the repossession may have been because you were laid off and you had to turn in the vehicle because you could not afford it. Now you can!!! How about THAT!
Denied? Call the lender for specific reasons why your loan request was denied. You can’t fix what you don’t know.
Request to meet with the Loan Manager (or their supervisor) in person, if possible.
Since your Credit Score (the Title of your book) may be … crappy, you may be able to get a second look. Remember, Perception is Everything! So, if you are able to meet with the manager in person, go to the meeting like you would a job interview and be prepared to share your story, answer their questions and ask lots of questions.
Ask for your Loan Request to be reconsidered.
Some lenders may have a loan appeal process. If they do not, ask for a loan manager or supervisor to review your loan request again. Make sure you send this request in writing with Your Story and supporting documentation, if available or necessary.
Offer to do Automatic Payment (Payroll Deduction or Direct Deposit).
If the lender knows that they are going to “automatically” receive the loan payments on time, they may see the loan request as less of a credit risk and may reconsider.
Consider a Counter Offer / Ask for a lesser amount.
The more the loan amount, the more the risk to the lender. If the lender does not offer a counter offer, ask for a lesser loan amount.
For example: Ask if they will consider approving $500 for 6 months instead of $1000 for 12 months. Let the lender know that you are open to negotiate.
Consider a Credit Union.
If your bank still won’t consider your loan request, try a local credit union. Unlike many banks, credit unions understand that Credit Scores are not the full story. Therefore, they may pay more attention to what is in the report, rather than just the Credit Score. Even if the credit union cannot approve your loan request, they may provide you with resources that will help you become more creditworthy in the future.
The reality is that not everyone will be approved for the loans they want. BUT… if you have a legitimate story as to why your credit is so “colorful” and you now that the means (income and ability to pay) to restore you credit, these tips may just help.
BTW … don’t forget to get a free copy of your credit reports at www.annualcreditreport.com. No one should know more about what’s in your credit than you do.