It happens.  Sometimes -

. . . it can be a matter of applying for the wrong kind of loan, or not finding the right lender. Here's a checklist of suggestions to help you get the credit you want -

Check Your Credit Report

Even if you are applying for a business loan, your personal credit report is likely to get as much, if not more, attention than your business credit report.  Lenders have learned that the most accurate "predictor" of how you (or your business) will handle credit in the future is the record of how you have handled credit in the past.

That's fine if the information on your credit report is correct.  Many times, though, there will be obsolete - or even wrong - information.  Some accounts may be reported twice, while others may not be reported at all.  

If you have corrections made to your report in the past, you may be surprised to find that the incorrect information has crept back.  

Fortunately, getting a copy of your personal credit report is one of the quickest and least expensive things you can do to improve your chances of getting a loan.

You might catch some errors or omissions, and you may also learn something useful.  Have you ever co-signed a loan for anybody?  If they start paying late, it could show up on your credit report even before the creditor notifies you. 

There's something else you need from your credit report - a list of your reported "revolving credit" - your credit card and charge accounts.  First, you need to make sure that all of your accounts are shown (this is the only way you'll get credit for making payments on time).

Next - you need to make sure that old accounts you cancelled are shown as closed.  Do you really want to risk having credit cards sent to an old address?  If you have accounts you are not using, and don't plan to use, write the creditor and cancel.

There's another reason to close revolving accounts you don't plan to use - many lenders count your credit limit as part of your total debt.  If you have ten $10,000 credit cards, many lenders will see this not only as $100,000 in debt, but also as $2,000 in monthly payments - even if you have zero balances!  Why?  Because you could draw down all of that cash any time.  Many people with excellent income and flawless payment habits get turned down because they have a long list of zero-balance revolving accounts - and the jargon on the turndown letter does not make the reason clear. 

Holding on to credit you don't need can prevent you from getting credit you want.  It will pay you to close old revolving accounts.

What else should you look for on your credit report?  Anything that would look odd to a stranger, like more than one currently-reported address.  Do you get a credit card billed to your work address?  It may be a perfectly good idea to leave it that way, but be aware that some credit scoring systems will weigh it against you.

Last but not least, if you ever had to get incorrect information taken out of your credit report, you need to check every now and then to make sure the mistakes don't creep back in.  The credit reporting companies are constantly updating their records from all kinds of sources, and the systems are so large that it's easy for old mistakes to get picked up as new information.  Monitoring Reports can help you stay aware of what's being added to your credit report.

How do you check your credit report?  Click here and  you can read a one-bureau report on your screen in 30 seconds.  It's free! You can also order a 3-bureau merged report - which is what a lender will do if you are applying for a real estate loan, or most kinds of business loans.  Are you applying for a business loan?  Click Here for a Credit Report on your Business.  

Are there mistakes on your credit report?  You can get them corrected by writing to the 3 reporting agencies - click here for information about how to contact them.

What if you have a bad credit history - or no credit history?  You need to establish some new credit - click here for details.

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Now that you have your current credit report to work from, you can calculate your debt ratio and housing ratio.  These numbers are used not only for consumer credit, but also for business credit - if you have a lot of personal debt, the lender will assume that you will take the money out of the business to pay it.

To get your debt ratio, do this -

A high debt ratio implies that there is high risk in lending you any more money.  How high is too high?  It depends on what part of the country you are in, what kind of loan you are applying for, and the lender's experience. 

If you can lower your debt ratio, you will save money (a low debt ratio implies low risk, and low risk translates into low rates).  The easiest way to lower your debt ratio is to cancel any revolving credit you don't plan to use - especially those old credit cards that outgrew their introductory "teaser" rates that you don't use any more.

Another way to lower your debt ratio is to use a consolidation loan.    Click here for Consolidation Loan information from GetSmart.com.

The other consumer loan "magic number" is the housing ratio, which, like the debt ratio, implies less risk if it is low.

To calculate your housing ratio, do this -

Now you have 4 useful numbers - your monthly debt-service requirement, your debt ratio, your monthly housing expense, and your housing ratio.  It will help you to keep these numbers in mind when shopping for loans - they are part of the lender's language.

You can get a free evaluation of your borrowing power from iCredit. Click here for Free Credit Analyzer

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Restructure Your Debt

The idea here is to make your personal balance sheet look more attractive to a lender.  

Once you have checked your credit report you'll have a good idea of how many zero-balance revolving accounts you can close.  You need to do this in writing - send a letter with the account number to the address shown on the credit report.  This is important, because credit card portfolios are often sold - that Visa card you got from Friendly Savings may have been sold to another institution.  If you haven't used the card for many months, you probably won't know the transfer happened.

Now you can review the credit you have decided to keep.  Do you have high-interest credit card balances you know you won't pay off within 12 months?  You may want to consolidate them into a longer term loan - especially if you're a homeowner.

If you have good credit, you should not be paying more than 10% for a credit card.  

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Test the Water

Just because some creditor turned you down does not mean that you have bad credit.  Lenders have to deal with their own situations, and this may affect your credit application even though you don't have anything to do with the lender's problem.

For example, you go to your bank for a car loan.  You get turned down.  What you don't know is that your bank has a large number of bad car loans, and they don't want to make any more for a while, so they pushed their underwriting standards upward.

You can get a "second opinion" about your credit right now, by applying on line for a NextCard VISA.  There's no fee, you'll get your answer in a minute, and you can choose a 2.9% initial rate or a 9.9% fixed rate.

Do you need to re-establish credit after a divorce, bankruptcy, period of unemployment, or other financial problem?  The Future Card VISA program may be just what you're looking for, and you can get the details right now . . .

Get an instant answer about your Business Loan application

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