Have you applied for a private student loan, but the application wasn’t approved? You’re not out of options! If you’re thinking about reapplying but are unsure of how to improve your chances of qualifying, we have some helpful tips on what actions you can take if you’re not approved for a student loan — and how you can strengthen your next application.
Figure out why the application wasn’t approved
First, you’ll want to figure out what caused the application to not get approved. Private lenders may look at various factors when underwriting an application, so it’s a good idea to reach out and ask for more information. Items which can impact whether or not an application is approved may include:
- Credit score
- Negative items on a credit report
- Debt-to-income ratio
Then, once you know the cause, it’ll be easier to take action in order to help your chances for approval.
Note: when an application is not approved, Climb sends out an “Adverse Action Notice,” which gives an overview of which factors prevented approval. So be sure to check your email!
Read through your credit report
You’ll also want to be sure to check your credit report to see what, if any, negative items are on there — you might even find inaccurate information that needs to be fixed! If you find any negative items, there are a few options for what you can do next.
Remove the negative items
- Submit a dispute to the credit bureau: If the negative item is inaccurate, you can submit a dispute to the credit bureau who provided the report, either online or through the mail. To submit a dispute online, you need a recently-obtained copy of your credit report. For a mailed dispute, you must include a letter describing your credit report, along with any supporting documentation.
- Submit a dispute to the business that reported to the credit bureau: Additionally, you can send your dispute in writing to the company that reported the negative item. When disputes are made, businesses are required to investigate the claim.
- Send a pay for delete offer to the credit bureau: If there is a delinquent or past due item on your report that is accurate, you can offer to pay off the full amount in exchange for having the negative item removed. While there is no guarantee that this will be effective, some creditors may take you up on the offer.
- Request a goodwill deletion: If you’ve already paid off the account and don’t have a payment to bargain with, you might try asking for a goodwill deletion. In this case, you’ll write a letter to the credit bureau asking for the negative reporting to be amended, describing why you were late and how you’ve since made consistently on-time payments. As with a pay for delete offer, creditors are not required to amend your report, although some may.
- Wait for the time limit to expire: If none of the above methods work, you can simply wait for the negative items to fall off your credit report. This will take some patience, though — most negative items are on your report for seven years (except for bankruptcies, which last for ten years). Fortunately, negative items carry less weight as time goes on and other, positive items are added to your report.
Take steps to strengthen your score
- Pay bills on time: Making on-time bill payments is one of the most important habits you can practice, and luckily there are ways to help make it easier for you. You can connect your bank account to ACH and schedule automatic payments, so you don’t have to worry about procrastinating or missing a due date because you forgot about it. Or, if you don’t want to connect your bank information, you can simply schedule reminders for yourself to pop up every time you need to pay a bill.
- Reduce your debt: This is another way you may be able to secure a good credit standing. Yes, we know, reducing debt is much easier said than done. But even small increments help, and the payoff is decidedly not small. Figure out what’s the most effective method for you and keep working at it.
- Stay below your credit limit: Showing you’re not spending beyond your means each month can also give your credit a boost. So, make sure you stay below the limit on your credit cards. Don’t whip out a card for every purchase (or maintain a budget to keep all spending to a minimum). If you really need to, you can also increase the limit on your credit card — as long as you don’t subsequently increase your spending in proportion to it.
Note: AnnualCreditReport.com provides a free credit report per year, from each of the three major credit bureaus!
Reapply with a co-borrower
Many lenders allow applicants to apply with a co-borrower. This is someone who signs onto a loan with you and in doing so, agrees to take responsibility for repayment should you become unable to make the payments on your own.
Having a qualifying co-borrower can increase your chances of approval, or even of getting a lower interest rate, as long as they have a strong credit history. However, it’s important to keep in mind that they’ll also have their credit pulled for the loan, which can impact their credit score. And they’ll also be held responsible if payments are not made, so you’ll want to be sure you make on-time payments to keep not only yourself, but also your co-borrower in good credit standing.
Note: want to learn more about student loan co-borrowers? Check out our article and informational video here!
Click the link below if you’d like to reapply for a Climb loan — submitting multiple applications won’t impact your credit score!*
*Climb performs a “soft” credit pull to evaluate eligibility, but this soft credit check will not affect your credit score. A hard credit pull is only performed once the loan is accepted and funded.