Reasons Why Auto Lenders Deny Applications

Get Car Financing
Even with poor credit.

By

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - October 10, 2019

Auto lenders typically deny loan applications when a prospective borrower poses too much of a risk to them. Lenders typically know which borrowers are riskier by looking at the applicant’s credit score and credit reports. However, not all lenders use credit as the only basis for car loan approvals, and there are many other reasons why they deny applications.

6 Reasons Auto Lenders Deny Applications

The lenders that look beyond credit scores are called subprime lenders. They approve borrowers for auto financing based on many additional factors, and if you can’t meet all their qualifications, they’re likely to deny your application for a car loan.

Here are six reasons an auto lender might turn you down for a loan:

  1. Your credit score is too low – Perhaps you’re applying for a car loan through a traditional lender, like a bank or credit union, when you’re turned down. These lenders generally only work with people that have good credit, which is typically a FICO credit score of 660 or greater.
  2. You pose a payment risk – If a lender looks into your credit history and discovers that you have trouble paying your bills on time, or that you have multiple accounts in collections, they may turn you down.
  3. You don’t have enough income to support an auto loan – You may feel like you have the income for a car payment, but lenders do a little math to figure out if you can truly afford this. Through a process of calculations, a lender “debts you out” to see how your monthly bills, including a car payment and auto insurance, stack up against your pre-tax monthly income. If you have too little available income, lenders may reject your application.
  4. You’re unemployed or under-employed – When you have poor credit, lenders have employment requirements that you must meet. Typically, this means having been employed at the same job for at least six months, and an employment history that goes back at least three years. Lenders also make sure there are no major gaps (over 30 days) in your employment. If you’re currently unemployed, those benefits don’t count as an acceptable form of income.
  5. You can’t prove your residence – Another requirement of subprime lenders is proof of residence, which typically means bringing in a current utility bill in your name. If you’re unable to produce a utility bill, some lenders may also accept official documents, such as bank statements, tax returns, or government-issued letters, but this varies by lender. If this is your situation, you should check the lender’s requirements before you apply. If you’re unable to provide these documents because all the official mail comes in your spouse’s name, you may have to add them as a co-borrower on your car loan.
  6. You don’t have a valid, working phone – An old adage that subprime lenders live by is “no phone, no loan,” which simply means a lender must be able to contact you or you’re not going to be approved for an auto loan. You usually have to provide proof of a working phone, in your name, that’s either a landline or a contract cell phone. Prepaid phones don’t count as far as lenders are concerned.

These are six major reasons why a lender may turn down a car loan application, but they’re not the only ones. You’ve probably heard the phrase “subject to lender approval.” This is a reminder that auto loans are very borrower-specific, and what works for you with one lender may not with another.

The Bottom Line

When it comes to getting a car loan, there’s a lot that can go into the process. If you have bad credit, it’s especially important that you prepare by having all the documents a lender requires that show you meet their qualifications. Without them, you’re liable to leave a dealership without getting approved.

Once you’ve gathered all the necessary paperwork, the next step is to find a lender to apply with – and that’s where we come in. CarsDirect isn’t a lender, but we can get you connected to a special finance dealer in your area that has the lenders you need.

We’ve been helping people get matched with local dealerships for over 20 years, and we want to help you too! Just fill out our quick, easy, and no-obligation auto loan request form to get the process started.

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.

Get Your Free Score

Auto Insurance

Get competitive quotes on insurance in your area.

Sell Your Car

We will buy any car, running or not, with or (in most cases) without the title.

Get My Price

Need a Car Loan?

It only takes a minute.

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2019 MH Sub I, LLC dba CarsDirect.com