Credello: Lenders Are Looking at Other Things Besides Your Credit Score
NEW YORK, May 8, 2023 (Newswire.com) - Credello: If you're considering getting a personal loan soon, you need to prepare your finances to look their best. Many people will only focus on their credit scores, but did you know that there are more factors that affect your ability to get a loan? It's true! Here are the other ways lenders can determine whether or not they should approve your loan application.
1. Your bank account history
Lenders want to see that you have the money to make your monthly payments and will often check out your bank account's histories to see how responsible you are with money. What they're typically looking for is that your account has a positive balance for most of your history and that you have some kind of history-making recurring payments to a company, such as a utility or data company.
Relying on your banking history is a relatively new change lenders have made as a way to make getting a credit history more accessible to previously underserved communities. Because of this, it's become even easier to get an installment loan with bad credit or no credit.
2. Rent payments
Another way lenders are opening up their criteria for loan approvals is by reviewing your rental history. Like your bank account, this is a way for lenders to determine how responsible you are at handling regular payments to a company, like a landlord.
3. Data trends
Many financial experts have advocated for lenders and credit bureaus to expand their criteria to more historical trends that include, but are not limited to, credit scores. While your credit report is a standardized method for determining creditworthiness, it's often limited to a "snapshot" of your financial history that might not account for things like COVID-19-related job fluctuations, sudden medical debts, or other anomalies.
However, don't assume that a historical trend of positive financial habits will completely wipe out a bad credit score. You may get approved for a loan, but lenders still offer the most competitive interest rates on personal loans for excellent credit scores of 700+.
How to improve your chance of getting approved for a loan
The best way to improve your chances of getting approved for a personal loan is to ensure you're prepared with your financial information. While credit scores are no longer the only factor affecting your approval odds, they're still the highest priority for lenders, so focus your effort on getting your score as high as possible before applying.
The easiest way to improve your score quickly is by concentrating on the two most heavily-weighted factors on a credit report: the number of on-time payments and your credit utilization ratio. The lower your credit balances and the more on-time minimum payments you make, the better your score will be.
In addition, speak to lenders beforehand to see what other criteria they might use and prepare documents relevant to each criterion. Bank account statements, rental agreements, and even a letter of recommendation from your landlord could go a long way toward improving your odds of getting a loan.
The bottom line
Lenders are expanding their criteria for loan approvals beyond just your credit score, and there are many ways to improve your chances of getting approved for a personal loan. Whether you're looking for a short-term or long-term solution, don't be afraid to ask your lender what other factors are important to them, and come prepared with evidence proving you're someone who handles money responsibly.
About Credello
Credello is a financial tech company offering a personal finance tool that simplifies financial decisions through personalized, on-demand recommendations — so users can borrow, save, or invest with confidence. Credello believes that finding the right financial product should be as easy and interactive as online shopping, and we are on a mission to make that possible. For more information, please visit https://www.credello.com.
Source: Credello
