Is There More to Approvals than Your Credit Score for Loans?
If you are looking to take out a home, auto, or personal loan, you may need more than a high credit score for loans. There are several factors that go into qualifying for a loan, as well as getting one at a good interest rate. Here are some questions you may be asking if you are looking to raise your chances of being approved for a new loan.
What other things do lender’s look for aside from credit score for loans?
Credit scores play a small part in the loan amount a borrower qualifies for, however it is not the primary factor. Many lenders today use the “Risk-based Lending” model. This is where the borrower’s credit score determines the interest rate the borrower will receive. Loan amounts are primarily driven by:
- Monthly income
- Current credit obligations
- Monthly house expenses i.e., mortgage, rent
A high credit score is great, however, when determining interest rate. A low interest rate on your loan, results in a lower monthly minimum.
What score guarantees a borrower gets a loan?
Having a 700 plus score is considered having good credit, so your chances of having a lower interest rate are good. Lender’s always look at the overall picture of the borrower’s credit worthiness when determining the amount and the terms. For example, a borrower could have a 750-credit score, but too high of credit obligations compared their monthly income for the lender to approve them.
What can I do to improve my chances of qualifying for a larger loan?
The weight of a credit score is determined by:
- Payment history
- Credit utilization
- Length of credit history
- Mix of credit types
- Credit inquiries
Unfortunately, there is no way to speed up your payment or length of credit history. You can, though, establish your credit as soon as possible, and always make your payments on time. It is important to keep your credit utilization down especially as it is one of the more heavily weighted categories and one that the borrower has the most control over on a month-to-month basis.
All things considered, when it comes to your credit score for loans, all you can do is have control over as many parts of your credit history as you can! You can learn more about managing your debt and repairing your credit to improve your approval odds by using our free financial literacy tool, Banzai.
For more information on applying for loans at Clark County Credit Union, please visit our website or call 702-228-2228.