Applications for credit can feel like being cross-examined, probed and prodded by lenders trying to assess your suitability for a loan – but what are they looking for? We’ve got the answers.
After our previous blog gave the lowdown on tumbling APR rates, we promised to provide the facts about loan approval.
Think of lenders as potential suitors on a dating site; each has a certain ‘type’ they’re looking for.
There’s common criteria you’ll be judged on, starting with the size of the loan you’re applying for.
If you want to repay a £5,000 loan over a five-year period, is £90 a month a reasonable expense for your circumstances?
Provide positive statements
Make no mistake, a lender will pay mind to your outgoings and the shape of your bank account. Think about it. How confident would you feel about lending money to someone who lives in their overdraft or has a habit of extravagant overspending?
If you are considering a loan, take control of your outgoings so your statements show a healthy and consistent flow of funds in and out of your account. This includes existing debt.
Your lender will scrutinise regular debt payments and, for larger loans, may ask you what they’re for.
Next, assess your employment status and current income. Lenders like a safe bet, and the longer you’ve been with your current employer the better.
Remember that lenders aren’t interested in the promise of a pay rise or a promotion either; they’re making a judgement on your situation right now, not what it could be in six months’ time.
Pre-empt the credit check
The same can be said for your credit rating. All accounts opened in the last six years are documented here, as well as a list of credit cards, loans, overdrafts, your mortgage and utility payments.
It means just one missed phone bill can put a mark on your credit history, and defaults remain on record for a year.
It’s a good idea to investigate your credit rating before a loan application to see if a negative rating is likely to pose any obstacles to approval.
With caution and common sense, there’s every reason your loan application will be successful if you stick to these fundamental points of guidance.
For previous loans or credit that may have PPI attached, check HERE to see if you could make a claim against your bank, loan or credit card provider.