5 Ways to Derail Your Loan Approval

Complete paperwork and careful timing can help you get a loan.

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Much of what it takes to get a loan is not just having enough income, it's also about presenting your records in a professional way at the right time. If you prepare yourself, you can avoid common pitfalls that can cause you to lose a loan approval. This applies to mortgage loans, personal lines of credit and business financing. Some of the biggest mistakes are the easiest to fix.

Hiding Information

Bring all of your financial records, and don't hide anything that may harm your chances of getting a loan. The bank will find it eventually anyway, so include it up front when you talk to a loan officer. Examples include a past bankruptcy, an unpaid debt, another property you own or child support payments you owe. Put it all on your application and attach explanations so you won't be accused of withholding information.

Paying Your Rent Late

If you don't pay your rent on time, it may not show up on your credit rating, but the bank may check with your landlord to see how you handle your debt. A history of missing payments can make it hard for you to borrow money from the bank. If you have been late in the past, make sure you pay your rent on time during the months before you apply for a loan. That way, even if the bank sees the previous late payments, at least you can demonstrate that you recovered and started making payments on time.

Current Disputes on Your Credit Report

If you dispute something on your credit report, get it resolved before you apply for a loan. Disputes themselves aren't bad, and you have a right to question anything on your credit report. In fact, you should order your credit report once a year and make sure nothing is on there that is not true. It is best to get this done before you apply for a loan. Current disputes will cause the bank to question your current credit rating.

Borrowing Money Just Before Loan Closing

If you get approval for a loan, don't assume the application process is over. If you go out and run up credit card debt, the bank could do what is called a "soft pull." That's one more check of your credit report before the bank actually gives you the money. If the loan officer sees a lot of new debt, you could lose loan approval.

Missing Tax Returns

You need to bring two years' worth of tax returns to your loan officer. If you don't have them, you will be unlikely to get a loan. An easy way to derail the loan process is to explain that you haven't filed your taxes for the previous year yet. Even if you don't owe the government money, you have to file returns. Present complete returns with your loan application.