Searching for a Loan? How to Increase Your Chances of Acceptance
You need more than a part-time job and a brief credit history to secure favorable loan terms today. The days of getting signed on for a home or car loan in one day are over. If you do not have impressive credit and a generous down payment, the loan application process is not going to be easy. Understandably, lenders are no longer able to take risky deals. Most people now find it difficult to get loans they need, but most will eventually get accepted.
Regardless of what you need to take out loans to purchase, there are ways to make yourself look less risky in the application process. You do not want to accept any loans unless they offer satisfactory terms. No one can say for sure that you will be accepted for a favorable loan, but there are five things you can do to improve your chances.
Clear Up Your Credit Report
The first task is to secure a copy of your credit report from all three credit organizations. It is critical to look at all three reports. Not all businesses report credit information to all credit bureaus. Thus, all three of your reports could have different data. Even more important, this means your FICO score could vary with all three credit bureaus.
Lenders will look at all credit reports and all FICO scores when deciding if you are suitable for a loan. Your scores should be as high as possible, but in the best situation they will be over 700. Scores less than 700 can reflect a negative light on your application, even if it is just one score.
Look over all of your reports and dispute any false information. Try to pay off any lower priced debts listed on your credit right away. If the credit bureaus cannot be updated right away, ask for something in writing stating the debt has been paid in full. Showing those letters to lenders may give them more comfort with you.
To improve your chances of approval, start paying on credit card debt already established. Lenders look for borrowers who have more open credit than maxed credit. The best reports feature open credit accounts that are not maxed out, and which have unused credit. You achieve this by lowering credit card balances, but leaving the lines of credit open.
Always keep your accounts available! You may need to make regular purchases on some accounts to keep credit open, but you have to pay them right back off to establish a low balance. Open credit is a signal that you have been trusted by other lenders, and that you are ready to handle that trust. High balances reveal the opposite, by representing that you are spending beyond your means or are not being responsible with your credit.
No More Credit Cards
Every time you apply for credit, it shows as an inquiry on your credit bureau report. When they see a string of inquiries into your credit, they know you are also asking for credit from many other sources. You typically will not be approved for all of those credit lines, but it doesnt look good to lenders. Do not try to get every card that comes your way, or you could hurt your chances of getting the credit extension you really do want.
Prove Job Consistency
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If you have maintained one consistent job for more than a year, you are going to be seen more favorably by lenders. Lenders will put more trust in an applicant who has a consistent, stable work history than someone who has changed jobs a lot or has just started a new job after a long period out of work. Lenders will require some proof that your employment is secure, so be ready to prove it.
Put Your Cash on the Line
Finally, offer up as much of your own money toward this purchase as you can. If your down payment is impressive, then lenders feel more at ease putting their own money into the mix. If you cannot invest in yourself, why should anyone else?
It must be noted that most people will have to put off applying for loans while they straighten out one or more of these points. If you take the time to get your paperwork in order in these ways, you could escape a denial the first time you apply for loans. It is always in your best interest to look into these preparations putting in the loan application. You do not want lenders to mark you down you as a risk.
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