3 Reasons For Car Loan Rejection in Burlington

3 Reasons For Car Loan Rejection in Burlington

Posted on July 22, 2021

Qualifying for a car loan in Burlington is as much about preparation as it is about the application. Getting your credit report up to scratch, ensuring your paperwork is in order, making sure you can afford the loan and applying in the right way are all effective but they can all be undone by a couple of mistakes. We see these mistakes often, which is why we asked our Burlington car loan team to outline three reasons for car loan rejection that can easily be avoided.

Avoid these and you stand a much higher chance of success.

Having too much debt

This is one of the biggest reasons for car loan rejection. Different people have different attitudes to debt. Some worry incessantly about it and will want to clear all debt as quickly as possible. Others don’t worry about it at all and don’t mind loading themselves up with debt and living month to month.

If you’re in the latter camp, be aware that lenders don’t view debt in the same way.

Be mindful of your debt to income ratio. Part of your credit report that assesses how much of your monthly income is taken up with debt payments. Lenders typically prefer no more than 30% of your income to go to paying debts.

Too many credit cards

Credit cards need to be handled carefully. We recommend having at least one or two and using them regularly to help with your credit mix and payment history.

Any more than that can become hard to manage and be a red flag to lenders. If all balances are zero, it shouldn’t matter too much. If you have balances on all of them, it can indicate out of control spending or lack of control over finances.

Even if you have everything under control, having too many credit cards presents a risk and lenders don’t like risk.

Have one or two credit cards and use them as you like. Just think carefully about having more.

Numerous hard inquiries on your credit report

We know quite a few people who apply for credit on a whim and don’t take it out. That’s fine unless you’re planning a car loan anytime soon.

A credit application involves hard inquiry on your credit report. Future lenders can see these when they perform their own check. Too many hard inquiries by too many institutions in a short time, is a red flag.

If you were shopping for a car loan and got preapproved by several lenders within a few days, that will be recognized for what it is. Shopping around. Anything other than that will be looked at carefully by any potential lender.

Those are just three red flags you can inadvertently show a future lender if you’re planning a car loan. We’re sure you can think of others, but you get the idea.

While we don’t want you to live or work differently, we would like you to consider the bigger picture and how certain actions can look from the outside. Certainly, if you’re planning to apply for a car loan anytime soon!

When you’re ready for a car lease or loan, get in touch with the Burlington auto loan experts at Northway Ford for great deals on auto finance.

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