You need more than a part-time job and a short credit history to secure favorable loan contracts today. Most people cannot run in, apply for a loan, and stroll out with a brand new car or home in one afternoon in the current lending market. The application process for all varieties of loans is becoming more detailed and difficult to pass. Lenders are simply no longer in a position to accept big risks. Most people now find it a struggle to get loans they want, but most will eventually get accepted.
The key to getting the loans you want for a new vehicle or house is to take steps to make yourself look less risky to lenders. Not only do you want to get approved for loans, but you want good loans with favorable terms. Listed here are five things you should do prior to applying, so you enhance your chances of securing the loans you need.
Clear Up Your Credit History
Never apply for a loan without checking your credit report. Make sure you check a copy of all three credit bureau reportings. Not all businesses report credit information to all credit bureaus. This means that all three of your reports could have different data. Since the data varies, your FICO scores will also change between different reporting agencies.
Lenders will take into consideration all credit reports and all FICO scores when deciding if you are suitable for a loan. Ideally, your FICO scores will be at least in the 700s, though you want them to be as high as possible. Even if you have only one FICO score beneath 700, your chances of being viewed as suitable for a loan decrease considerably.
Take action right away to fix any misreported information on any of your reports. If you have unpaid debts for less than a couple hundred dollars, take care of them if at all possible. You can also request letters verifying you have paid off these debts. Those receipts or letters can be shown to lenders as evidence you have paid it off.
Take Care of Debt
If you have outstanding credit card debt, now is the time to start paying it down. A lender hopes to see that you have lines of credit from other lenders, but are not maxing it all out. You should have credit cards with limited balances, as well as some lines of credit that are not being used. You achieve this by eliminating credit card balances, but leaving the lines of credit open.
Make sure your existing lines of credit remain open to you. If a line of credit requires you to buy something every now and then to continue the open line, do it but pay the charges off immediately. Lenders look for loan applicants who have available credit because it shows that other banks have taken a risk on them, and they are using the credit wisely. High balances reveal the opposite, by hinting that you are spending beyond your means or are not being responsible with your credit.
Stop Applying for Credit Cards
When you apply for an additional line of credit, it will become a part of your credit report. When lenders see a line of inquiries into your credit, they know you are also asking for credit from many other sources. Even if you do not agree to credit for all of those inquiries, it looks bad to lenders. It is in your advantage to reserve the application for lenders that you really want to work with .
Keep Your Consistent Job
Lenders prefer to work with people who have held one full-time job for many years. Lenders will put more trust in an applicant who has a consistent, stable work record than someone who has rotated jobs a lot or has just started a new job after a long period away from work. Lenders will require some proof that your employment is consistent, so be ready to prove it.
Save for Your Down Payment
Make your down payment as big as possible. If you are ready to put some of your own hard-earned money up, then lenders feel reassured about putting their own money down. Why should anyone invest in your interest, when you are not able to invest in yourself?
Remember that most people will have to wait before applying for loans while they strengthen their case on one or more of these points. If you take the time to prepare in these ways, you could avoid a denial the first time you apply for loans. How you come off on paper is important, so take the time to get your finances in shape. You do not want lenders to view you as a risk.
The key to getting the loans you want for a new vehicle or house is to take steps to make yourself look less risky to lenders. Not only do you want to get approved for loans, but you want good loans with favorable terms. Listed here are five things you should do prior to applying, so you enhance your chances of securing the loans you need.
Clear Up Your Credit History
Never apply for a loan without checking your credit report. Make sure you check a copy of all three credit bureau reportings. Not all businesses report credit information to all credit bureaus. This means that all three of your reports could have different data. Since the data varies, your FICO scores will also change between different reporting agencies.
Lenders will take into consideration all credit reports and all FICO scores when deciding if you are suitable for a loan. Ideally, your FICO scores will be at least in the 700s, though you want them to be as high as possible. Even if you have only one FICO score beneath 700, your chances of being viewed as suitable for a loan decrease considerably.
Take action right away to fix any misreported information on any of your reports. If you have unpaid debts for less than a couple hundred dollars, take care of them if at all possible. You can also request letters verifying you have paid off these debts. Those receipts or letters can be shown to lenders as evidence you have paid it off.
Take Care of Debt
If you have outstanding credit card debt, now is the time to start paying it down. A lender hopes to see that you have lines of credit from other lenders, but are not maxing it all out. You should have credit cards with limited balances, as well as some lines of credit that are not being used. You achieve this by eliminating credit card balances, but leaving the lines of credit open.
Make sure your existing lines of credit remain open to you. If a line of credit requires you to buy something every now and then to continue the open line, do it but pay the charges off immediately. Lenders look for loan applicants who have available credit because it shows that other banks have taken a risk on them, and they are using the credit wisely. High balances reveal the opposite, by hinting that you are spending beyond your means or are not being responsible with your credit.
Stop Applying for Credit Cards
When you apply for an additional line of credit, it will become a part of your credit report. When lenders see a line of inquiries into your credit, they know you are also asking for credit from many other sources. Even if you do not agree to credit for all of those inquiries, it looks bad to lenders. It is in your advantage to reserve the application for lenders that you really want to work with .
Keep Your Consistent Job
Lenders prefer to work with people who have held one full-time job for many years. Lenders will put more trust in an applicant who has a consistent, stable work record than someone who has rotated jobs a lot or has just started a new job after a long period away from work. Lenders will require some proof that your employment is consistent, so be ready to prove it.
Save for Your Down Payment
Make your down payment as big as possible. If you are ready to put some of your own hard-earned money up, then lenders feel reassured about putting their own money down. Why should anyone invest in your interest, when you are not able to invest in yourself?
Remember that most people will have to wait before applying for loans while they strengthen their case on one or more of these points. If you take the time to prepare in these ways, you could avoid a denial the first time you apply for loans. How you come off on paper is important, so take the time to get your finances in shape. You do not want lenders to view you as a risk.
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