Nobody likes getting turned down for a loan. And although White Sands FCU makes every effort to approve all loan requests, it’s sometimes necessary to deny an application–to protect the applicant’s financial health, as well as the credit union’s.
When the credit union denies a loan, it’s because the applicant has either (1) a poor credit history, or (2) a high debt-to-income ratio. Your debt-to-income ratio is the percentage of your total debt compared to income. For example, if each month you pay $400 toward debt with a $1,000 gross (before tax) monthly income, your debt-to-income ratio is 40%. Although there’s no magic ratio to shoot for, a rough guideline is that total debt shouldn’t exceed about 36% of total income. The credit union also weighs other factors, and requirements vary for different loans.
If your loan request gets rejected, here are a few things you can do to improve your chances for approval on your next application:
- Devise a plan to pay off old loans, including credit card balances, thus reducing your debt-to-income ratio.
- You may qualify to consolidate your loans and credit card balances into one loan at White Sands FCU; then stop overusing credit cards.
- Get a handle on your budget by comparing what you spend with what you earn. A budget can help you trim expenses and funnel money toward paying off old debts.• Fix your broken credit history. White Sands FCU will work with any member who is sincere about re-establishing good credit.
- Bolster your income with a second job, temporarily, to help trim your debt.