Concerned about credit? You’re not alone. Millions of Americans are out of work, facing unexpected bills, and are struggling to manage debt payments, get approved for loans, and keep up a credit score.
Financial planning is never easy, and it’s harder when you’re weathering a pandemic. Here are some common questions you might be asking during this time:
- How can I get help
managing debt? If you’re impacted
financially by COVID-19, reach out to your lender and explain the
situation. Clearly note how COVID-19 impacted your income and
provide as much documentation as you can. Right now, lenders are
doing their best to support customers through this rough patch and
reinforce long-term relationships.
Most lenders will be willing to offer some kind of forgiveness, such as temporarily suspending payments, waiving late fees or lowering the interest rate. Some lenders are also not reporting late payments to credit agencies. Alternatively, your lender may suggest you consolidate multiple unsecured debts into a single secured debt at a lower interest rate.
Ask plenty of questions – and make sure you understand what the relief measures entail. Do they have associated fees? When will they expire? What will your options be after the relief period ends? Will interest continue to accrue?
- How can I improve
my chances of getting a loan? Typically, an
application is denied because of credit history. Potential lenders
will either find no credit
history, or not enough, making it difficult to determine the risk of
defaulting on the loan.
Lenders may also be nervous if they see high credit card balances, too many recent credit inquiries, lack of long-term employment or poor financial liquidity. Another component is your debt-to-income ratio: how much you earn compared to how much you pay towards debt each month. Lenders look for a higher debt-to-income ratio, which indicates stronger financial stability.
Understanding why lenders might deny your application is important: It gives you a place to start improving your credit. You can always ask why a loan was denied, and your lender is required to tell you – although they may not share all available information.
- Should I keep applying if I’m denied? Yes, absolutely. Being denied a loan does not impact your credit score (although the number of times your credit report is requested will). But “shopping around” is an essential step toward finding a loan that meets your financial needs. Compare factors like interest rate, application fee, origination fee, points and third-party fees to find the best deal for you.
At Axiom, we’re committed to supporting the health and financial wellness of community partners, small businesses, and neighbors throughout the pandemic. To learn more about our services – including convenient online and mobile checking – and our other support during COVID-19, visit www.axiombanking.com.
Axiom Bank, N.A., a nationally chartered community bank headquartered in Central Florida, provides retail banking services, including checking, savings, money market and CD accounts, as well as commercial banking, treasury management services and commercial loans for both real estate and business purposes.