4 Ways You Could Be Sabotaging Your Loan Application

The reality is that banks are ready to lend money today—as long as you understand their requirements and present yourself as a reliable borrower.

Unfortunately, many potential borrowers unknowingly sabotage their own chances of securing a mortgage.

Here are four common mistakes that might be making it harder for banks to approve your loan..

1. Missing Bill Payments

When it comes to tighter lending standards, maintaining a spotless credit rating is crucial. One of the simplest ways to do this is by ensuring your bills are always paid on time.

Thanks to technology, it’s easier than ever to automate your payments, either from your bank account or your credit card. Neglecting to pay bills promptly can leave a negative mark on your credit report, which won’t help your case with lenders.

To avoid unpleasant surprises, consider checking your credit report for free through various online services before the bank does. This proactive step can alert you to any issues and give you a chance to resolve them.

2. High Credit Card Limits

A common pitfall for many borrowers is holding multiple credit cards with substantial limits. While you may not have maxed out these cards, lenders look at the total credit limit rather than just the balance.

For example, if you have two credit cards with a combined balance of $1,500 but an available credit limit of $20,000, banks see the higher number. This access to credit implies you could rack up significant debt, potentially affecting your ability to repay a loan—something lenders frown upon.

3. Excessive Credit Spending

Overspending on credit is another red flag for lenders. Whether it’s financing vacations or splurging on luxury items, using credit to pay for non-essentials can signal poor financial management.

To present yourself as a more attractive borrower, limit credit card spending to necessities and pay off your balance each month. Keep in mind that the money on your credit card isn’t yours—it belongs to the bank, and using it comes at a cost.

4. Multiple Credit Applications

In today’s digital world, every financial move leaves a trail. Your credit score can be impacted not just by how you use credit but also by how often you apply for it.

Repeatedly applying for credit—whether for cards or loans—can make lenders wary. If you’ve been denied credit and keep applying to different institutions, it raises questions about your financial stability and ability to manage debt.

Submitting a strong loan application is more important than ever. While there may be more steps to navigate, the basics of securing a loan haven’t changed: lenders prefer borrowers who are responsible with their finances, maintain a budget, and live within their means.

These are just a few common ways you could be hurting your chances of getting approved for a loan. If you’re unsure, consider consulting a skilled mortgage professional who can guide you through the process and boost your chances of success.