There’s no universal formula that guarantees loan approval, but there are many things you can do to increase your chances. While requirements usually vary lender to lender, there’s one thing they all have in common: wanting to get paid back on time.
Here are some ways to prove you’re a reliable borrower, increasing your chances of getting approved, so you can get a loan as soon as possible.
1. Check Your Credit Score
Credit score is a major consideration taken into account when lenders look at applications. The exact score requirement is typically not disclosed, but good or excellent credit is preferred. You should always know your credit score before applying for a loan. There are a number of free online services that allow you to check it without harming your score and some companies even offer a free FICO score. Although a good credit score is favored, it’s not impossible to get accepted for a loan with a poor credit score. You can learn more about bad credit loans from TLC here.
2. Order A Copy Of Your Credit Report
A full credit report gives you a complete and deeper look into your financial past. You can get a free credit report once a year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Taking a close look at your credit report will show areas where you’re on track and where you need to improve. It shows any outstanding debt along with repayment history and a few other factors that impact credit score. You should also be on the lookout for any errors. If any are found you should submit a written dispute to the credit reporting company immediately. This is will help increase credit score as well.
3. Make All Payments On Time
Consistently making on time payments is one of the easiest and most effective ways to increase credit score. Past payment history is a good predictor of future performance. You want to make all payments on time, not just credit card bills or loans, but also rent, utilities, phone bills, etc. If you’re already making all monthly payments on time, try paying more than just the minimum if possible. This benefits payment history and credit utilization ratio, which is the percentage of available credit in use. These factors together make up 65% of FICO score.
4. Pay Down Debt
Debt-to-income ratio is another major impact on credit score. If you have a high ratio, paying down debt is the best way to increase your score. There are many strategies to conquer debt, including making extra payments or picking up a side job. To start paying down debt also consider selling liquid assets such as stocks held in taxable accounts. Using the proceeds toward high-interest consumer debts should get you a higher rate of return, says Alison Norris, advice strategist and certified financial planner at personal finance company, SoFi. While not all lenders have strict debt-to-income requirements, it still helps to show your current debt is under control, thus increases your chances of getting approved for a loan.
5. Submit A Joint Application With Creditworthy Cosigner
If your credit score is less than ideal, applying with a creditworthy cosigner can increase your chances of approval. Often times lenders are more willing to give out bad credit loans if someone with a good credit score is willing to cosign, since they’re agreeing to make payments if the primary borrower is unable to do so. It’s critical that the cosigner is someone that can afford the risk. Using a relative or close friend is usually best, as they must be comfortable with sharing your debt.
6. Find The Right Lender
Although lenders look at many similar factors when considering loan applicants, each company has different requirements, rates, terms, etc. Having an already established relationship with your lender increases your chances of getting approved as well. While your bank or credit union are good places to start when applying for loans, shopping around is important. Financial experts usually suggest to shop your loan to at least three lenders, ensuring you get the best rates. Even if you have no trouble getting approved, it’s smart to shop around and ensure that you’re working with a reputable company.
Personal Loans With TLC
At Total Loan Company, LLC the loans we make are as individual as the people who apply for them. If you need a personal loan, we can help. Application is quick and painless, and no need to worry about secret or hidden costs. With TLC you know exactly what you pay with fixed rates and absolutely no extra fees. You are with a reliable company that has 24/7 customer support and data protection.