A flag that shows a high number of credit inquiries

5 Credit Report Items That Scare Lenders

Milad Hassibi April 27, 2018


If you have good credit yet have been constantly been getting denied a home or auto loan, something on your credit score may be sending a red flag to lenders. Anytime you apply for a line of credit (such as an auto loan, personal loan, or a mortgage), lenders will heavily inspect your credit scores and your credit report.

If lenders see something on your credit history they don’t like, you may be rejected or slapped with a high-interest rate loan. There are common red flags lenders look at such as any repossessions, bankruptcies, and even late payments. However, most lenders will dive deeper to see if you are able to repay the loan balance.

Here is a list of 5 things that can send a red flag to any lender:

Co-Signing

Being a cosigner can be a great way help a friend or relative get the loan that they need. However,A request being denied as you may know, from being a cosigner, the debt that you cosigned for technically counts as your debt as well.

This will be applied to any mortgage or auto loan you may apply for. If the person you cosigned for stops making their payments or is late, that will have a direct impact on your credit report.

If a friend or family member asks you to cosign on a loan, be wary and vigilant. If that person defaults on the payments, the lender will have the legal right to come after you for the remaining debts. You can learn more about cosigners here.

New Credit Inquiries

Every time you apply for a new line of credit and a lender does a “hard” inquiry, your score will be impacted. The amount of impact varies from consumer to consumer. If you decide to search for a loan, its best to inquire about your loan from various lenders within a 2 week period.

By only applying for lines of credit within that period, all inquiries will count as only 1 inquiry that gets reported to the three big credit bureaus. You can learn more about how credit inquiries affect your credit here.

Minimum Payments

If you have a history of making only minimum payments, that can be a red flag for many lenders. Consistently paying only the minimum amount may be a signal to lenders that you are in a financial stiff, and are unable to pay the full amount.

It can also be an indicator to lenders that you are unable to pay off your balance, making them reluctant to provide you with a line of credit.

Short Sales

There is a common misconception with short sales in that many consumers believe that it will not impact their credit scores, however, that is not the case. Credit reports do not recognize “short sales” whatsoever and a short sale will show as “settled”, meaning that the full loan balance was not paid off. This can impact your score as much as a foreclosure would.

Cash Advances

Using a cash advance service is a massive red flag for any lender. Applying for a cash advance is a tall tale sign of financial desperation. You may be unemployed or are not bringing home enough income to pay your basic living expenses.

A cash advance raises a red flag because the amount you took out as an advance will be added to the total debt that you owe, thus lowering your credit amount available and lowering your overall credit score.

Each and every lender has their own credit scoring model to see if a borrower is able to repay, and many of these models are set to heavily penalize cash advances due to the factors that make most consumers apply for one.

Get a Car Loan with Any Credit Along with a Happy Couple and a New Black SUV next to them

Final Note

Searching for a car loan? Many large dealerships and even most used car dealerships won’t work with consumers who have bad credit. In this case, you will need to find a subprime lender who can help you get the loan you need.

If you are looking to finance your new car and have less than ideal credit, CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.

 



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