Today, in addition to assessing whether a loan will be profitable, lenders will also assess whether a consumer can repay a loan. Beyond reviewing a credit report and score, lenders need further verification of a consumer’s financial information. The name for this additional step is Loan Affordability and it generally takes on six criteria:
- Verification of income
- Assessment of quality of income
- How many loans you currently have outstanding
- Amount of disposable income vs. the monthly loan amount to be repaid
- Gambling
- Bounced checks
How to Increase your Chances of Getting Approved for a loan
Look over your credit history
As you may know, the history on your credit report is an integral part of creating your credit score. Your credit score is one of the main values that lenders will use when assessing your risk. By looking over your credit history you can learn what factors are holding you back from having a higher score and take actions to improve your score. In turn, your chances of receiving your desired loan will increase.
Try using your bank
If you have been with the same bank for years, try getting your loan through them. Whether you have a chequing, savings accounts or both, your bank will know you better than most financial entities. They can see your wages and your account activity, which can improve your chances of you receiving a loan.
Know the type of loan you need to be approved for
You should have a suitable reason for needing a loan. For example, taking out a loan for a holiday may come off as a red flag to many lenders.
You should also know what type of loan you need. For example, there are specific lenders that you can work with to finance a vehicle.
Have references
If you don’t want lenders to judge you based on your credit history alone, you can present references to lenders that show you have paid certain bills on time.
For example, you can request a reference from your landlord showing that you have been a good tenant and paid your rent on time. This also goes for mobile phone contracts, car payments, electric, and the other bills you pay on a regular basis.
Know your Affordability
Remember that you should only apply for loans you think lenders will approve. When you apply for the same type of loan across multiple lenders the searches and inquiries will show on your credit report. So, if you want to keep from lowering your credit score you should do your homework.
By using a loan affordability calculator, you can calculate what loans lenders are likely to approve you for before inquiring about them.
We have teamed up with AccountScore and their sister company Consent Online to help solve this issue. Our goal with this partnership is to bring what currently happens with lenders today to the consumer so that you have the ability to understand exactly how lenders view you when trying to get approved. These companies facilitate the usual Loan Affordability consumer interaction electronically by allowing the consumer to authorise the transfer of this information from their bank to the lender directly.
So how does it work?
After you sign up to ScoresMatter you can begin your on-boarding experience in the Loan Affordability tool. From there you can see what loans you can afford which we present in easy to read scales and scores. To top it all off you will receive insight on how to improve your chances for loans in the future. We even grant you the ability to see all of your past, present and future in Loan Affordability terms.
Tap Into The Digital You at ScoresMatter today and see what you can afford.