There’s a lot of things lenders look at when they’re considering whether or not to approve a loan application.
Not many people realise that, like all businesses, lenders have their niche or target market and as a by-product of that, they develop their credit policy to target that niche.
In the next few posts we’re going to take a look at the things that have an impact on loan approval, starting with your Credit Score and Credit Report.
CREDIT SCORE
This is really a subset of Character, however in most cases, the first thing a lender does is a Credit Check, particularly if the application is submitted online. Depending on the lender, this can be the single most important factor in determining whether or not you get the loan and the rate you get it at.
I strongly suggest to anyone applying for any sort of loan that they check their Credit File well before applying for a loan and to at least join a few of the free sites so you can keep tabs on it.
Your Credit Report includes information like:
• Your Personal details – name, address, date of birth, Driver Licence number and employment history
• Credit applications you’ve made
• Defaults (overdue accounts)
• Bankruptcy Act Information
• Court judgments
• Records of Directorships and Proprietorships
• Records of current credit accounts
• 24 months repayment history on most financial liabilities and debts.
The advantage of keeping a regular check on your Credit Report means any anomalies can be checked out and fixed sooner rather than later.
The obvious things lenders are looking for are credit defaults, court judgements, bankruptcies and Part 9 and 10 arrangements. What most people don’t realise is that some lenders place a great deal of importance on how many times you’ve applied for credit and what type of credit you’ve applied for previously.
Your credit report doesn’t always affect your ability to be approved for a loan, BUT … it can have a big effect on what lender will lend you money and the COST of the loan; costs like the fees and charges to get into the loan and the ongoing interest rate.
These are some tips to keep control of your Credit Score:
• Think strategically before applying for finance of any description, be it business or personal. Ask your broker to do as much homework as possible BEFORE submitting your application.
• If you haven’t already, apply for a copy of your credit report and join some of the free sites today; there may be some things on it you weren’t aware of. It’s also a great way to keep on top of Identity Theft.
• Don’t let creditor disputes end up in collections; you could end up with black marks on your report. Get on the phone, work through your issues and if necessary, approach the ombudsman for that industry and lodge a complaint.
If it can’t be resolved, it’s probably worth paying the debt under protest and going to the local small claims court to challenge it or engaging a professional debt negotiator to negotiate on your behalf.
• If it’s too late for the above and you have a black mark(s), then engage a professional to remove it (them) from your file. The cost of having this done can often far outweigh the time and the headache of explaining why your report is tainted and the increased costs because it IS tainted.
If your bank has turned you or your business down for finance, you could still have some options. If you’re interested in finding out what options you have, Book a Time to Chat with Leanne now.
