Home equity loan denied?
Ok me and my wife just recently applied for a home equity loan but got denied. We need an equity loan for home improvements. Our credit is great, and our home is completely payed off, the reason why we got denied was because of our debt ratio which was the cause of our credit cards and personal loan which we were never late on, we just had to much open. We now just payed off EVERYTHING we owe including the six credit cards and the one personal loan.
My question is do we have to wait a certain amount of time to reapply or can we just apply again now? We really need to do some home repairs as well as make it look nice :)
Also should we close all six card accounts?
- 10 years agoFavorite Answer
Don't wait, reapply now. Close the cards you've had the shortest length of time, with the highest available balances. Good luck.
- timothy pLv 710 years ago
Leave a couple of the cards open and your balance at $0 to maximize your utilization ratio for scoring purposes. Close the rest of the cards so it doesn't appear that you have the ability to go right back into debt. While scores like to see a low utilization to show you aren't spending more than you earn, loan officers like to see that your debt to income ratio doesn't have the potential to change quickly if you decide to run up your credit cards. It is a fine line if your debt to income is an issue.
If debt to income is the issue, wait until the paid off balance reports before you apply. This usually happens around your billing date. Paying them off will likely improve your score and qualify you for a better rate. Closing the excess account will stabilize your potential debt to income ratio.
- 10 years ago
Don't close your credit card accounts, that will make your score drop for doing so. If your balances are all paid off, check your credit to see what it is showing on all 3 reports. See if there is any errors. Fix the errors now since it can take up to 6 months to a year to clear it up. After the items are cleared up then apply for home of equality.
- Go with the flowLv 710 years ago
Do NOT close your credit cards.
This will do you absolutely no good - it will actually hurt you.
Closing old cards will only hurt your credit rating.
It will delete part of your credit history
and you could also be closing your oldest card -
length of credit history is 15% of your rating
and a lot of unused cash on credit cards is good for your credit.
Shows credit worthiness.
Wait at the very least 45 days from the date your payments cleared to re-apply.
You need time to allow the credit bureaus to update your information.
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- JudyLv 710 years ago
If your debt ratio is too high, you won't get approved even if you've never been late, they'll be afraid you're heading toward being in trouble.
If you don't actually owe on the cards, and the lender is looking at available balance, yes close them.
- 10 years ago
Sometimes, this may be the difficulty in home equity loan approval if you have a bad credit history.
- dirkjohn69Lv 410 years ago