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Don't Be Anxious If You Are Declined Credit

On being denied credit an individual should approach the creditor and identify the key reasons for rejection of application

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Being denied credit might be inconvenient and frustrating especially in the light of an urgent credit requirement. Usually credit denial comes as a result of the borrower's perceived inability to pay back a loan. It often occurs due to previous blemishes on the borrower's credit history. The tendency to get loans is relatively lower if one has bankruptcy on their record, a history of missed payments or other red flags such as an incomplete credit application. But it also might simply be that one is not the type of customer that the prospective lender is looking for. Having said that, lenders cannot refuse an application without giving any reason and most have codes of practice that specify the main reason if you ask.

Approach your lender
When a lender refuses to extend credit, it is only human nature to want to know why. On being denied credit an individual should approach the creditor and identify the key reasons for this negation. This will help the borrower work toward rectifying existing disputes with the intention to improve the chance of getting credit in future. Every lender is expected to give you the main reason (or reasons) for their decision as per the Credit Information Companies (Regulation) Act, 2005. Lenders usually do not reveal too many details concerning how they assess applications for credit. Revealing excessive information would make life easy for fraudsters at the cost of innocent consumers and the credit industry.

Don't pay for advice which comes free
If you are finding it difficult to get a loan, never be tempted to turn to so-called credit repair companies. These companies claim to be able to get rid of negative information from your report - in return for a fee. While they charge you for doing something, you can do it yourself for free by contacting the credit information company directly or with the help of a credit counsellor.

Look to resolve disputes
There are instances where individuals are victims of identity theft. A customer could be denied credit if someone has been accumulating debt on your behalf. In such a case where a consumer's identity has been stolen, it is imperative to report the same to the necessary authorities. These consumers should intimate the bank of the identity theft that has taken place and also report the same to the credit information company.

Every credit bureau provides consumers with the option of resolving disputes in their credit report. However, any change to the credit report can be done only post concurrence from the bank. If a consumer wants to make a correction to the credit report, he/she will have to send an information rectification request to the relevant bank as well as an update to the bureau for correction of information. This request must be accompanied with the relevant supporting documents to have the necessary changes made. The bureau will work with the bank to work on the request and get the relevant information corrected. It is always prudent to review credit reports on a regular basis so as to alert one on a possible fraud such as identity theft.

Although you've been denied credit, don't give up hope just yet. You can still build up your credit and get on the path to financial fitness with help at hand.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Mohan Jayaraman

Mohan Jayaraman is managing director of Experian Credit Information Company India and Country Manager of Experian India

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