Declined for a Car Loan by Your Bank or Credit Union? What to Do Next

Each lender weighs your credit history, your income and what you already owe against its own rules. Banks publish short lists of the reasons they say no, and a credit union’s loan page names the same factors in how much it will lend: your credit history, your income and your other debts. These are the reasons that come up most.

• Late or missed payments. A history of late or missed payments, especially recent ones, makes a decline more likely.
• Too much debt next to your income. Lenders add up what you already owe each month and compare it with your income. If too much of your pay is already spoken for, there is little room for a new payment.
• Income the lender cannot confirm. Banks ask for a pay stub or a T4, and more if you are self-employed or on contract. They also want to see that the income is likely to continue.
• A score below that lender’s minimum. A lender can set a minimum score for the loan you ask for. If your score is below it, the application can be declined.
• A mistake on your credit report. A payment marked late that you paid on time, or a closed account that still shows as open, can make a file look worse than it is.

It is often a mix. One bank says a decline can come from a combination of marginally weak factors rather than one big one. And every lender sets its own rules, so the same file can get a different answer somewhere else.

It means this lender, for this loan, did not fit your file as it stood that day. It does not mean your income does not count, and it does not tell you what any other lender will say.

A credit rating changes as your circumstances change, and lenders decide on your current financial circumstances. That is why the reason matters more than the “no”. One major bank says that if an application is not approved, it will help you understand the reasons why. So ask. Write down what you are told.

We cannot promise what any lender will decide. What we do is review your application, match it with lenders that fit your situation, and call you back. For how that differs from going to one bank, read dealership financing compared with a bank loan. For the kinds of files that do get financed, see the car loans we funded, by score and income.

Take these in order.

1. Ask the lender what drove the decision. Was it the score, the debts next to your income, the proof of income, or something else? You cannot fix what you have not named.
2. Get both credit reports. Equifax and TransUnion are Canada’s two main credit bureaus. Each lets you see your credit report online for free, and you can ask them to mail you a free copy. Read both. Use the bureaus’ own sites, because fraudsters pretend to offer free reports to steal personal information.
3. Check them for mistakes, and dispute what is wrong. Look for payments marked late that you paid on time, accounts that are not yours and closed accounts that still show as open. You have the right to dispute information you believe is wrong, and the bureaus must correct errors for free.
4. Fix what you can. Payment history is the most important part of a credit score, so pay on time. Government guidance is to try to use less than 30% of your total credit limit, and a lower debt-to-income ratio improves your chances with a lender.
5. Change the size of the ask. A smaller loan, more money down or a co-applicant with stronger credit can each change how a lender sees the file. A co-applicant is legally responsible for the loan, so it is a big ask. Read do cosigners help with a bad credit car loan and how down payments work.
6. Apply where lenders price the file you have. Some auto lenders design their programs for buyers whose needs many traditional lenders do not meet. Rates in our lender programs follow your score band, as the table below shows. We review every application and call you back, and every lender decides each file.

Rates in our lender programs run 4.99%–29.9% APR. Where you land inside that range depends on your score band and the rest of your file.

Your score band is a starting point, not the whole file. Lenders also weigh income, debts, time on the job and the size of the loan. For how pay and score work together, read good income, bad credit car loans. For the full picture by tier, see how subprime and prime financing compare and car loan rates by credit score.

• Government photo ID.
• Recent pay stubs. If you are self-employed, your latest Notice of Assessment and a few months of bank statements.
• The reason the lender gave for the decline, if you have it.
• A void cheque or direct deposit slip, and proof of address.

For how pay stubs, employer letters and T4s fit in, read what car lenders verify when you work. If you run your own business, see self-employed car financing in Alberta. The quickest start is the online application. We review every application and call you back. Or call us at (825) 736-4438.