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Searching for a Loan? Five Steps to Increase the Odds of Your Acceptance

By Mark Jones


You need more than a part-time job and a limited credit history to secure favorable loan contracts today. The days of getting approved for a home or car loan in one day are over. Gaining acceptance for loans now involves an extensive application process that can drag out for those who do not have excellent credit and down payments. Understandably, lenders are no longer able to take big risks. This makes it difficult to be approved for a loan, but it does not mean it is impossible.

Regardless of what you need to apply for loans to purchase, there are ways to make yourself look stable and trustworthy in the application process. Not only do you want to get approved for loans, but you want good loans with favorable terms. No one can guarantee that you will be accepted for a favorable loan, but there are five things you can do to increase your chances.

Clear Up Your Credit

You have to view your credit report before you start applying for loans. Make sure you look at a copy of all three credit bureau reports. Some creditors deliver information to all three, but many only report to one or two that they prefer. It is common for all three of these credit reports to vary in some manner. Your FICO scores could also vary from one credit reporting to another.

Most loan organizations and banks will check with all three credit bureaus when deciding if you are well suited for one of their loan programs. You want your scores to be as impressive as possible, but at the very least you are aiming for FICO scores more than 700. Even if you have just one FICO score under 700, your chances of being viewed as suitable for a loan decrease considerably.

Go through all of your reports and dispute any false information. If you have unpaid records for less than a couple hundred dollars, take care of them if at all possible. You might want to request something in writing that verifies you have paid off those debts. Those receipts or letters can be shown to lenders as proof you have paid it off.

Pay Up on Debt

If you have outstanding credit card debt, now is the time to start making good on those obligations. Lenders look for people who have more available credit than maxed credit. The best reports feature lines of credit that are not maxed out, and which have open lines of credit. You achieve this by lowering credit card balances, but keeping the lines of credit open.

Always keep your accounts available! If you have to make inexpensive purchases and pay them off soon after to keep accounts open, make sure you do it. Lenders look for borrowers who have available credit because it shows that others have taken a risk on them, and they are using the credit wisely. Banks do not like to find maxed out credit cards, because it shows you may not be using your credit responsibly or may be overextending yourself financially.

Stop Applying for Credit Cards

When you apply for another line of credit, it will show up on your credit report. They can see the other inquiries to your credit and recognize you are shopping for credit lines. They usually cannot see how many of those inquiries led to an extension of credit, but it doesn't look good for your case. Do not fill out new applications so you do not set back your chances of being approved for loans from the lender giving out reasonable agreements.

Prove Work Security

If you have worked one consistent job for many years, you are going to be looked upon more favorably by lenders. Those with consistent work histories are seen as less risky than those who change jobs frequently or seem to struggle keeping a job at all. Lenders will ask for some proof that your employment is consistent, so be ready to prove it.

Save for Your Down Payment

Finally, offer up as much of your own money toward this purchase as possible. If your down payment is impressive, then lenders feel more at ease putting their own money into the pot. If you refuse to invest in yourself, why should they?

Most people need some time to gather all of these five points together. That slows down the process of making the purchase you want to make, but it could stop an immediate rejection the first time you ask for a loan. How you come off on paper is important, so take the time to get your finances in shape. You do not want lenders to see you as a risk.




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