Many consumers are still having significant financial difficulties these days, either as new problems have developed or some have lingered since the end of the recent recession, and one mistake many may make as they attempt to deal with these issues is that they apply for numerous lines of credit.
Those who want to get their credit back on track but have diminished scores — for any reason — may be tempted to send out new applications for loans or credit cards. But doing so, particularly after receiving rejections, can actually have a significant negative impact on one's standing, and as a consequence, those whose scores are so low they cannot obtain the financing they may want should discontinue attempting to do so again until they've done a bit of credit repair.
Why this should be done
The reason it is important for borrowers to avoid sending in too many applications for new lines of credit is that the frequency with which they are doing so accounts for a portion of one's credit rating. The reason for this is that in general, lenders will see repeated attempts to obtain new financing as being a sign that a borrower is having significant cash flow problems. As such, this factor alone makes up 10 percent of a person's credit score, which can obviously be considerable in determining exactly where such a rating falls. The way this portion of one's score is determined is based upon the number of applications submitted by a consumer in a period of a few months, and more is certainly considered worse.
Of course, not all applications are considered the same. Borrowers are allowed to do a bit of "rate shopping" when they apply for credit, and a number of applications for the same type of credit sent out in a period of a week or two will tend not to count against them. This is a fairly common practice among people looking for a new mortgage, for example, as it will help them to find the line of credit that works best for them given the interest rates and associated fees based on their scores. But any repeated attempts beyond that are considered to be a negative.
For this reason, any borrower who has applied for a line of credit and been rejected outright might want to take the time to consider why this happened. Most often, it came about because their credit scores were already rather low, meaning that additional attempts will only do more harm to an already damaged rating, and consequently make it less likely that any subsequent requests for new accounts will be met with approval. It is for this reason that a rejection should actually give borrowers pause, and cause them to reassess why this happened in the first place.
Credit repair a big help
Any time borrowers receive rejections on lines of credit for which they have applied, it is perhaps the best possible time to order copies of one's credit reports and assess exactly what brought their scores so low. There are many reasons one's rating might be diminished, including repeated missed payment deadlines or carrying too much credit card debt, and taking the time to evaluate why this happened will likely be a significant opportunity for borrowers to figure out how best to boost their standings back to respectability. Because a credit report will show all information related to a borrower's credit in general, it will also give people the best possible idea of their problems and can be used to help draw a roadmap for credit repair that can be achieved with relative ease.
However, consumers should also be aware that while credit repair can be a straightforward process, it can also take several months or more to complete even basic efforts to return scores to respectability. As such, borrowers who receive rejections might want to prepare as much as possible for the process of getting their credit back on track, as this may include making more on-time payments, or larger contributions to balances as a means of reducing debt to more reasonable levels.
On the other hand, in the course of checking their credit reports, it is also possible that borrowers discover that there are unfair markings listed in their names. These entries can be extremely problematic for borrowers and significantly reduce their scores from where they otherwise might deserve to be. If any such markings are discovered on credit reports, it might be extremely helpful to work with a credit repair law firm, as this may help them to correct the issues more expediently than a borrower might have been able to otherwise.