Are you a credit conscious person? Have you put time and effort into improving your credit score? If so, you have likely worked hard to ensure you always make your payments on time and avoid things that may negatively impact your credit rating.
If so, you may be surprised when you are rejected for a credit card or a loan. Or, if you haven’t yet been denied, you may be concerned about being denied in the future.
It’s estimated that people who have a FICO credit score of 800 or higher is only about 20%. While this is true, even these people aren’t guaranteed credit approval. Something that many people don’t realize is that their credit rating is not the only factor considered when it comes to being approved.
Even individuals who have “excellent” credit scores may face denial. Keep reading to learn what else you need to keep in mind if you have a good credit score and you are planning to apply for some new type of credit.
A Short or Limited Credit History
How long you have had credit will play a significant role in how much of a risk you pose. This is something that is frustrating to many people. Regardless of how high of a credit score you have, there are many businesses and banks that may not want to approve you if your have a short or limited credit history.
If this is your situation, you may wonder what you can do about it. Due to the nature of this situation, the only option is to wait it out. As time passes, the issue will go away. While you are waiting, be sure that you continue making payments on time to help keep your credit score as high as possible. Usually, a good length for credit history is a minimum of a few years. You can talk to the bank you are planning to apply with to find out what they consider an adequate amount of time.
Your Debt-to-Income Ratio
Another factor that is considered is your debt-to-income ratio. This is how much debt you currently owe compared to the amount of money you earn. In this factor, your credit score doesn’t come into play. It’s important to note, that even if you have good credit, your debt-to-income ratio may be considered subpar.
To figure out your debt-to-income ratio, all you have to do is to divide the monthly debt payments you have by your total monthly gross income. The gross income includes everything, including what is taken out for taxes. A good debt-to-income ratio is dependent on what you are applying for and the organization’s standards.
If you are worried about your credit, or one of the other factors that may impact your ability to be approved for new credit, work with the professionals. They can help you create a plan to give you the best chance of approval when you are applying for any type of new credit.