14 Possible Reasons Banks Are Saying No to You

Discover the untold secrets behind your bank's mysterious rejections.

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Updated May 28, 2024
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Banks don’t want to loan money to someone who won’t repay them. To measure the risk, lenders look at various factors to evaluate the likelihood you’ll default.

If you have a lot of debt or an unfavorable credit history, banks may view you as an undesirable borrower. Their perspective could hinder your financial goals, like buying a house, starting a business, or trying to move beyond living paycheck to paycheck.

When you apply for a loan or credit card, it may be challenging to get approved if you have these 14 things.

Low credit score

Andrey Popov/Adobe low credit score

Lenders often look at a potential borrower’s FICO score to determine their creditworthiness.

A lower credit score can indicate a history of late payments, outstanding debts, and accounts sent to collections.

Unfortunately, a low credit score may cause a lender to deny your credit application or charge you higher interest rates.

No credit history

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Without a credit history, there’s no credit score for lenders to assess your creditworthiness.

It makes establishing trust with financial institutions difficult because there’s no evidence that you are responsible with your finances.

To build a credit history, you may consider becoming an authorized user on a family member's credit card or opening a secured card.

Insufficient income

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Most banks will ask for proof of income when you apply for a loan. It can help them ensure you make enough money to repay it.

A low income means a higher risk of default, so banks may limit the amount you can borrow and charge higher interest rates.

If your income is too low, consider asking your employer for a promotion or raise or picking up a side hustle.

Unstable employment

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Some banks will look at your employment history when reviewing your application for a loan. They may consider it an essential factor in assessing your creditworthiness.

If you frequently change jobs or experience periods of unemployment, it can be a red flag to lenders. It may mean your income isn’t stable and indicates a higher probability that you will default on a loan.

Too much debt

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Having a lot of debt can also make you undesirable to banks and credit card companies.

Financial institutions may not extend additional credit to you if they think your existing debt may affect your ability to make timely payments on a new loan or credit card.

Banks often look at your credit utilization and debt-to-income ratio to measure your capacity to take on new debt.

History of late payments

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Not only will late payments lower your credit score, but they will also reduce your creditworthiness in the eyes of lenders.

Banks and credit card companies don’t like to see a habit of paying your bills late. It can indicate irresponsibility with money and raise concerns about defaulting.

You can schedule reminders for your bills and set up automated payments to prevent late payments.

Delinquent accounts

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If you’re late paying a bill, your account may become delinquent. Typically, accounts 30 days or more past due are considered delinquent.

Delinquent accounts are much more severe than occasional late payments because it shows prolonged neglect of your finances.

Financial institutions consider people with delinquencies a higher risk, leading them to deny their credit applications, limit their access to credit, and charge them higher interest rates.

History as a credit fraud victim

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If you were a recent victim of credit fraud, the offender may have caused significant damage to your credit history and credit score.

The damage can make it difficult for banks to assess your creditworthiness, making you a less desirable borrower.

It may also lead them to question your ability to protect sensitive financial information, increasing your perceived credit risk.

Lack of collateral

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When you apply for loans, banks often want you to pledge assets as collateral. For example, with a mortgage, the collateral would be the house you’re financing.

This way, the bank takes on less risk because it can repossess assets in case of a default.

When applying for a loan without collateral, banks may view you as a risky investment and are more likely to deny your application.

Past foreclosures or repossessions

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If you’ve experienced foreclosure or repossession of assets, it may make banks hesitant when considering your credit application.

It can signal a lack of financial stability and difficulty repaying financial obligations.

Rebuilding trust with lenders after a foreclosure or repossession may be difficult. However, you can do it with on-time payments, reducing your credit utilization, and using a secured credit card.

Frequent credit applications

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Each credit application creates a hard inquiry on your credit report, and your credit score may drop a few points. While this isn’t inherently bad, many inquiries in a short time can mark you as a risky borrower.

It may signal that you are desperate to cover expenses or existing debts and may raise concerns about your ability to manage your finances.

Unfortunate life event

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Events outside of your control may harm your finances. Some examples may be medical emergencies, divorce, or job loss.

These life events may lead to increased debt, missed payments, and bankruptcy. Unfortunately, they can cause a decrease in your credit score and make it challenging to secure credit cards and loans with favorable terms.

Errors or missing information on your credit application

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Financial institutions may deny you credit if there is any wrong, missing, or unverifiable information on your application.

Banks depend on accurate data to determine your creditworthiness. Any discrepancies can lead to uncertainty and distrust.

After you submit a credit application, it may be a good idea to contact the lender and ask if they have received all the necessary information.

Poor banking history

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Financial institutions may also examine your banking history to assess your financial responsibility.

They may think twice about approving your application if they see frequent overdrafts, Non-Sufficient Funds (NSF), or bounced checks.

It can make you an undesirable candidate because it shows mismanagement with money and flags you as a potentially risky borrower.

Bottom line

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Banks look at many factors to determine the risk of lending you money. You may be seen as an undesirable candidate if you have a lot of debt, little income, or a low credit score.

Although your financial history can make getting approved for credit challenging, it does not define your current and future ability to manage your finances and grow your wealth. You can still raise your credit score, reduce debt, and increase your income.

It’s never too late to improve your financial standing so that banks will view you as a more reliable borrower.

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Author Details

Carley Clark

Carley Clark is a personal finance writer from Michigan. She graduated from Spring Arbor University with a bachelor's degree in business. After graduation, she worked in finance as a revenue auditor at a casino. Carley strives to write informative content that will help readers meet their financial goals.