Having a small amount of income and decent credit is no longer enough to secure loans with reasonable terms. The days of getting
approved for a home or car loan in one afternoon are over. The application process for all types of loans is getting more detailed
and difficult to maneuver. Lenders are on edge and do not want to take many risks. This makes it difficult to be approved for a
loan, but it does not make it impossible.
If you are interested in loans to go back to school, purchase a new home, or upgrade to a hybrid vehicle, there are some things
you can do to increase your chances of getting accepted. Not only do you want to get accepted for loans, but you want good
loans with favorable terms. There is no way to guarantee you can do that at this time, but there are five ways to put the odds in
your favor.
Clear Up Your Credit
The first thing you should do is secure a copy of your credit report from all three credit bureaus. It is important to get all three
reports. Some creditors repot to all three, but many only report to one or two that they prefer. This means that all three of your
reports could have different information. Further, this means your FICO score could be different with all three credit bureaus.
When considering you for loans, banks and lending firms will consider all information and all available FICO scores. You want
them to be as impressive as possible, but in general you are aiming for FICO scores above 700. When you get below 700 even
for one score, you appear to be a much higher risk for lenders.
Go through all of your reports and dispute any inaccurate information. If you have small unpaid debts, pay them off and request
the credit bureaus be updated. You can also ask for letters proving you have paid off these debts. That may help build trust with
lenders.
Pay Off Debt
If you have a lot of credit card debt, now is the time to start paying it down. Lenders look for people who have more available
credit than used credit. This means that your account balances are very low, and you have some open credit that you are not
using. To get that balance, you want to pay off as much of your credit debt as possible while keeping the accounts open.
Never close your accounts! If you have to make small purchases and pay them off immediately to keep accounts open, do it.
Lenders look for applicants who have open credit because it shows that others have taken a risk on them, and they are using the
credit responsibly. They do not like to see maxed out credit cards, because it shows you may not be using your credit responsibly
or may be overextending yourself with credit.
Stop Applying for Credit
Every time you apply for credit, it shows as an inquiry on your credit report. When a lender sees that you have recently applied to
many different lenders for credit, they know you are shopping around. They may not be able to see how many of those inquiries led to an extension of credit, but it doesn't help your case. Lay off the applications so you do not hurt your chances of getting
loans from the lender giving out reasonable agreements.
Prove Employment Consistency
The longer you have been at the same job, the better off you are going to be applying for loans. Lenders will put more trust in
someone who has a consistent, stable work history than someone who has switched jobs a lot or has just started working after a
long period out of work. Be prepared to prove your employment is stable, so lenders have faith in you.
Invest in Yourself
Finally, put up as much of your own money toward this purchase as possible. If your down payment is sizeable, then lenders feel
comfortable putting their own money into the pot. If you won't invest in yourself, why should they?
Note that most people will have to delay applying for loans while they
work on one or more of these points. That slows down the
process of making the purchase you want to make, but it could save you from getting denied the first time around. It is better to
prepare ahead of time so you look good on paper. You do not want lenders to see you as a risk.
