The credit score of a person is a numerical representation of past credit-related behavior of the person. Taking the credit score as the primary factor, the eligibility of a person for a loan is determined by the lenders. Blog: https://amritaagarwalblog.wordpress.com/2018/04/09/why-personal-loans-are-rejected-with-good-credit-score/
He applied for an online personal loan and to his utmost shock; his application was reverted with a refusal by the lender. This situation was beyond his imagination. He went to a personal finance expert and came to know that there are other reasons too which can make a personal loan application go rejected. Here are the reasons which the expert has explained to Ashok. • A High Loan To Income Ratio– As lenders check credit score, they check FOIR (fixed obligation to income ratio) of a person before sanctioning a loan. Prior to approving a loan, they check if there is any other ongoing loan of that person which he is repaying at present. The total outgo of a person including the applied one, must not be more than 50% of the total take-home income. If it happens, there are chances that your loan is going to be rejected. • Being Guarantor of A Defaulter– In spite of having a good credit score, one may face rejection of a personal loan if he/she was ever a grantor of a person who has been found defaulter of the same loan. When you become a grantor to someone’s loan application, this activity of yours is recorded by the credit bureau and reflects on your credit report. If the person for whom you acted as a loan guarantor defaults the loan, this will even be reflected on your credit report too. This can be one reason of getting a loan application rejected. • Address Marked In the Defaulter’s List– In some of the very unfortunate scenario, it happens that your address has become the reason for rejection of a loan. If any person sharing the same address has defaulted a loan in past, the address will be listed as defaulter’s address by the credit bureaus. A fresh application from the same address is counted as an application from defaulter’s address hence lenders reject such applications. • Poor Credit Score of The Co-Applicant– If you are applying for a joint loan and your co-applicant has a poor credit score, your loan application may be rejected. Being a co-applicant of a person with a bad credit report can result in facing a rejection.
• Insufficient Income– Along with many other criteria which ensure a person’s creditworthiness, income is also one of them. Every lender keeps a criterion of a minimum income below which they don’t grant a loan. Though your credit score is excellent, your loan can be rejected if your cash flow is less than the minimum income line mentioned by the lender. • Unstable Income Source– Along with income, lenders check the employer of salaried persons and the business stability of self-employed persons to check the regularity of income. A stable and regular income source is a must to repay the loan on time. If the lender is not satisfied with the source of income of the applicant, the loan application can be rejected. • Files Bankruptcy In Past– Bankruptcy is a situation when a person declares that he is unable to pay his debts. Hence banks take action such as liquefying his assets to recover the lent money. If a person files a bankruptcy, this action of him will be recorded on his credit report. So any lender will know this fact while checking his credit history. Such records can make lenders reject a loan application. • Loan Rejection in Past– A loan application rejected before can act as the reason for getting the next application too rejected. A frequent loan application shows a credit hungry behavior of an applicant. When a lender gets to know that his previous loan applications are rejected, he becomes more conscious and this may result in rejection too. • Mistakes On The Application– One must be very careful while filling the loan application form. Any mistakes in the application or any wrong information in the application can make the lender reject the application. Whether it may be an online personal loan application or a conventional one, one has to provide the genuine information without which a loan can be rejected.