10% of Americans Were Denied Credit in 2022. Here’s What to Do if You Were One of Them

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Being unable to borrow money when you need to can put a serious dent in your finances. Learn how to avoid being denied credit in the future. 

According to the Federal Reserve, around 10% of Americans were denied credit in 2022. And, another 13% wanted to borrow but didn’t even bother to try applying because they thought they would be turned down if they did.

If you were one of them, you know how disappointing this is. After all, chances are good that you applied for a personal loan because you really needed the money or wanted it to accomplish something important to you. And not being able to get a credit card or otherwise borrow money could mean you end up without the credit profile necessary to buy a house or car or pay for purchases over time.

If you were among those Americans turned down by lenders, or if you fear you might be if you try to apply to borrow in the future, here’s what you should do.

1. Find out why your lender denied you

When you are denied credit, you are entitled to receive an “adverse action notice” if the denial was a result of information found in your credit report. Lenders typically send this within seven to 10 days of the time that you are turned down to borrow.

Take a close look at the denial to see what issues caused your lender not to provide you with the credit you requested. You can also check out the letter to get information like your credit score.

If you were denied because of a low credit score, check your credit report to see if there are errors on it or if there is legitimate negative information like late payments or delinquent accounts. You can get a copy of your credit report from each of the major credit reporting agencies for free by visiting AnnualCreditReport.com.

Understanding why you were denied is the first step in either appealing the decision with the creditor or trying to fix the situation so you can borrow in the future.

2. Work on improving your financial credentials

After identifying the reason for the credit denial, start working on whatever issues came up. For example, if your credit score was too low and a glance at your credit report shows you have a few missed payments, then you’ll want to focus on paying your cards and loans on time in the future.

If you’ve mostly paid on time but have one or two negative reports because of an accidental missed payment, you could also try contacting your creditor and asking if it will remove that negative info as a gesture of good will. This strategy will likely be more effective if you’ve been a good customer who usually pays on time and just slipped up once.

If there are errors on your report affecting your score, you can contact each of the three credit bureaus to have the mistakes removed. Just follow these basic instructions for removing incorrect info from your credit record.

On the other hand, if you were denied a loan because you have too much debt already or are using too much of your available credit, you’ll need to work on paying down what you owe before you can borrow more.

3. Research lenders who provide loans to people in your situation

Finally, if you still really need to borrow and you have to do it before you’ve had time to fix your credit record or debt history, you can research lenders that are likely to loan to you. For example, some lenders offer personal loans even to people with imperfect credit. Secured credit cards are also available to those with bad credit or no credit history (although you do need to put down a deposit equal to your credit limit).

When researching your options, look into the terms of the loan — especially the interest rate and upfront fees — and make sure you’re comfortable with the total costs before moving forward. Loans made to borrowers without great credit can sometimes be very expensive.

Ideally, you will be able to fix whatever the issue was that caused the credit denial by taking some of the steps mentioned above. Doing so will mean having your choice of lenders going forward and you won’t have to worry about not being approved for credit in the future.

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