There are many reasons why a lender might not accept your finance application for car or asset finance. Below, we have outlined 5 of the most common reasons why a lender might not accept your application.
1. A missed payment on a previous loan
It’s a good idea to check your credit report before you apply for finance, as this will give you an idea of your credit history. Information will be held on your credit report for up to six years so even if you missed a payment five years ago, it will still be on your record today.
2. Multiple credit applications in a short space of time
Another reason that your finance application might be rejected by a lender is because you have made too many credit applications in a short space of time.
Credit inquiries are recorded on your credit report whenever you apply for a car loan, personal loan, mortgage or credit card. The more inquiries you have on your credit report, the higher risk you appear to lenders. Each inquiry on your credit file stays visible for 2 years and can remain visible after this time period if it is from a personal loan or auto finance application.
Credit inquiries only have a small impact on your credit score but making multiple inquiries in a short space of time can have a negative impact on your ability to access finance.
3. Applying for a loan that’s too large
Applying for a loan that’s too large may cause a lender to be concerned about your ability to repay. There are three key ways in which you are judged in terms of affordability when you apply for credit:
– How much you’re earning
– What your other commitments are – how much you’re paying out each month
– How much can you afford to pay each month?
4. Poor credit history
If you have poor credit history, a lender is likely to be wary of lending to you. They may feel that lending you money is too risky because there’s a chance they won’t get it back. A lender will check your credit file to assess how likely this is.
Your credit history shows how well (or poorly) you have managed past debts and repayments. It includes:
– Details about all your accounts, including credit cards and loans
– Details about any defaults or court judgements against you
5. Lenders might not accept your finance application due to factors you may have overlooked
If your application for finance is rejected, there are a few things you’ll want to do. Firstly, contact the lender and ask for feedback about what led to the rejection. Secondly, see if there’s any way you can remedy the problem (eg. pay off an outstanding loan). Thirdly, start looking at other lenders.
Every lender has its own particular set of standards regarding how much risk they’re willing to take on and if you apply for finance with a lender who doesn’t feel comfortable funding your loan based on their criteria, then that doesn’t mean another lender won’t be happy to help you out. This is one of the many reasons why it’s beneficial to use a finance broker as we will know which lender is most likely to lend to you based on your individual circumstances.
Dorsia Finance is an asset finance and car finance brokerage based in Lincoln. Get touch by emailing info@dorsiafinance.co.uk or giving us a call on 01522 420 420
