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From the Experts at

Understanding Your Debt Collection Rights

Debt Collection Rights

Uh oh, you’ve been turned down for a loan. What’s the next step? Should you check your credit? Figure out why you were turned down? Apply for a loan somewhere else? First you should relax and take a deep breath. Believe it or not, being turned down for a loan can be a good thing. Being turned down for a loan alerts you to a problem with your credit or your financial situation. The trick is to use this opportunity to get the problems fixed!

The first step is to figure out why you were turned down. You’ll receive a letter from the lender shortly that describes why you didn’t meet the lender’s criteria. You’ll also receive instructions for ordering a free credit report from the credit bureau the lender used to process your application. You are entitled to this free “adverse action” credit report by law.

But since this whole process can take a few weeks, it would be smart to get started now instead of waiting for that letter to arrive. When you first learn that you have been turned down for credit, it is a good idea to check your credit report quickly. You can order your credit reports once every 12 months for free through the Annual Credit Report website and see your score for free using’s Credit Report Card.

Check your credit report closely for negative records such as late payments, collection accounts or bankruptcy filings. These negative records lower your credit score and make you appear to be a risky borrower. If the records are accurate, you can calculate their expiration date to see when the records will come off your credit report (usually after 7-10 years). If the records are inaccurate, you can file a dispute to have your credit report fixed.

You should also read your credit score closely. Most online credit scores come with detailed analysis that explains which factors are impacting your credit standing. You can use this analysis to figure out why you might have been turned down and what you can do to improve your score. You may need to reduce your debt balances, improve your payment behavior or work on your balance of accounts.

If you believe your credit has been damaged by identity theft, it is important to act quickly. Reporting the case to the credit bureaus and law enforcement in a timely manner can make it much easier to remove the fraudulent records from your credit reports.

Once your loan denial letter arrives, you can use that information to see if your credit check matches up with the lender’s reasons for denial. If it does, great job! You’ve already started working on improving your credit and fixing the problems. If it doesn’t, you may need to do some more research. The lender could have rejected your application for many reasons: income, the length of time you’ve been at your address, homeownership status, an error in your application or lending restrictions for your state. If you have questions about why you were turned down, call the lender’s customer service team for more information.

The loan denial letter also includes instructions for obtaining a free credit report from the bureau that was used for your application. You are still entitled to receive a free credit report if you have been turned down for a loan, even if you have already requested the three free credit reports you can get each year. Make sure you use this free report opportunity! Request your credit report following the instructions provided. If you’ve already started working on your credit, use this free additional report to see if anything has changed.

You should only consider applying for a new loan after you’ve gone through all these steps. Each time you apply for a loan, your credit score gets dinged with a “hard inquiry.” So you could damage your credit score by applying for multiple loans that you know you may not get. Work on improving your credit and financial standing first, and then try submitting an application again.

If you need money now and can’t qualify for a personal loan, you can investigate other ways to borrow money. Credit cards and emergency loans could provide you with the money you need. You can also consider using savings or borrowing from a family member or asking your employer for an advance and working out a payment plan.

Being turned down for a loan isn’t fun, but it can be a good opportunity to take a hard look at your credit and financial standing. Let your loan denial serve as a wake up call. You can use’s Free Credit Report Card tool to create an action plan to help increase your credit score, as well as your likelihood of being approved for loans in the future.

  • Eric Hansen

    That’s beginning to happen to many people,you lose your job making decent wages and you cant find another job,or the job you can find doesn’t pay half as much as you used to earn.If you are trying to pay out $4 for every $1 you earn it can’t be done! Many people are losing everything they have!

  • Thomas

    If you cannot pay your bills captaindandan, bankruptcy is right.

  • Gerri Detweiler

    So sorry to hear that. Have you thought about talking with a credit counselor or bankruptcy attorney?

  • Gerri Detweiler

    Call them and tell them exactly that. That you want to receive written notice of the debt by mail. They are required to send you that by law within 5 days of initially contacting you. If the threaten a lawsuit over the phone without sending you a written notice of the debt then they are likely either a scammer or breaking the law. If that happens come back here and tell us what they said and we’ll point you to some resources that can help.

  • Michael Bovee

    What is the name of the collection company you are paying?
    What was this debt for originally?

    • Bella143

      The bill originally was a hospital bill. I am sending checks to The Law Offices of Mitchell D. Bluhm and Associates in Texas. The represent CP Medical LLC.

      • Michael Bovee

        I would send a written request for an accurate accounting of all monies paid, and how those payments are being applied. Be sure to clearly identify who you are, your address, any internal file number they use related to your account. I would send certified mail return receipt, and keep a copy of your letter and the green return receipt card together.

        I would wait a week or two for a response. Then call and ask for a reply verbally after bringing someones attention to it.

        Post an update with what happens, and if you have not gotten anywhere, lets go from there.

        • Bella143

          Thank you so much. I will keep you posted. I am trying to get the previous agencies to send me receipts.

  • Gerri Detweiler

    I would suggest you talk with your state attorney general’s office and/or a consumer law attorney to find out whether this is legal. Unfortunately interest on judgments varies by states and I can’t advise.

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