When you apply for a car loan, one stringent requirement that you might have to meet is a good credit score. A person with a high credit score stands a greater chance to get approval from loan providers as his or her credibility appeals to them.
But is this the situation always? Perhaps no. Many people don't get approved despite their excellent credit scores. You may be one of them too. If you are facing rejection from lenders, here could be the possible reasons:
Your credit history is short
It takes about a year to build a good credit score. But some lenders have a minimum credit history length which you may not have. They require at least a few years of credit history before granting the loan. A short credit history doesn't always please lenders which is why they turn down your application.
Your debt-to-income ratio is high
Even if your credit score is high, lenders want to know more about your creditworthiness. If your credit report shows more debt than income, you may face rejection from lenders. Your debt burden may be high because of multiple reasons, but you can reduce it by making payments on time.
You look for sign-on bonuses
Some people have a habit of applying for many credit cards to get sign-on bonuses. You may be one of them too. You may have a credit card after you stop using it after you get your bonuses. This is a loss for the bank which is why they reject loan applications. Try not to get lured by such rewards always if you want a loan.
You declared bankruptcy in the past
Last but not least, your loan application gets rejected if you have declared bankruptcy in the past. It takes about seven years for such items to disappear from your credit report. It's possible to clear it off, but some lenders are particular about who they are lending to.
No matter what, you should always aim at keeping your credit score up by clearing outstanding debts and making future payments on time. You just have to be a little more patient.