Has your student applied for a private student loan, but the application wasn’t approved? They’re not out of options! Here at Climb, we allow multiple application submissions. And if they’re about to reapply but are unsure of how to improve their chances of qualifying, we have some helpful tips on what actions they can take if they’re not approved for a student loan — and how they can strengthen their next application.
Figure out why the application wasn’t approved
First, they’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 they know the cause, it’ll be easier to take action in order to help their 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 your student should be sure to check their email!
Read through their credit report
They’ll also want to be sure to check their credit report to see what, if any, negative items are on there — they might even find inaccurate information that needs to be fixed! If they find any negative items, there are a few options for what to do next.
Remove the negative items
- Submit a dispute to the credit bureau: If the negative item is inaccurate, they can submit a dispute to the credit bureau who provided the report, either online or through the mail. To submit a dispute online, they will need a recently-obtained copy of their credit report. For a mailed dispute, they must include a letter describing the credit report, along with any supporting documentation.
- Submit a dispute to the business that reported to the credit bureau: Additionally, they can send their 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 the report that is accurate, they 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 them up on the offer.
- Request a goodwill deletion: If they’ve already paid off the account and don’t have a payment to bargain with, they might try asking for a goodwill deletion. In this case, they’ll write a letter to the credit bureau asking for the negative reporting to be amended, describing why they were late and how they’ve since made consistently on-time payments. As with a pay for delete offer, creditors are not required to amend the report, although some may.
- Wait for the time limit to expire: If none of the above methods work, the student can simply wait for the negative items to fall off their credit report. This will take some patience, though — most negative items are on a 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 the report.
Take steps to strengthen their score
- Pay bills on time: Making on-time bill payments is one of the most important habits one can practice, and luckily there are ways to help make it easier. The student can connect their bank account to ACH and schedule automatic payments, so they won’t have to worry about procrastinating or missing a due date because they forgot about it. Or, if they don’t want to connect their bank information, they can simply schedule reminders to pop up every time they need to pay a bill.
- Reduce debt: This is another way they 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. Your student should figure out what’s the most effective method for them and keep working at it.
- Stay below their credit limit: Showing they’re not spending beyond their means each month can also give their credit a boost. So, they should make sure to stay below the limit on their credit cards, maintain a budget to keep all spending to a minimum, and, if they really need to, they can also increase the limit on their card — as long as they don’t subsequently increase 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 (like Climb!) allow applicants to apply with a co-borrower. This is someone who signs onto a loan with the applicant and in doing so, agrees to take responsibility for repayment should they become unable to make the payments on their own.
Having a qualifying co-borrower can increase 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 the co-borrower will 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 the student will want to be sure they make on-time payments to keep not only them, but also their co-borrower in good credit standing.
Note: want to learn more about student loan co-borrowers? Check out our article and informational video here!
If your student would like to reapply for a Climb loan, click the button below — submitting multiple applications won’t impact their 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.
