Many of us will need financial help at some point in our lives, whether that’s personal loans, direct payday loans, or short-term loans. But if you’ve got a less than perfect credit score, your chances of approval may be lower. Thankfully, there are a few things you can do to help improve your chances. Read on as we take a closer look at improving your chance of loan approval.
Check your credit score
Your credit score is one of the most important factors that lenders consider when deciding whether they should lend to you. To improve your chances of approval, you should make sure that you check your credit score so you are aware of how it may impact your application. You can do this easily online. If your credit score is low, between 0-560, you’ll need to improve it before you apply for a loan to boost your chances of approval. Your credit score may appear low if you’ve struggled to pay bills in the past, or if you simply don’t have a credit history built up to show lenders how you manage your cash.
There are a few ways you can improve your score – start by ensuring there are no mistakes on your credit report, as this can cause your credit score to deplete. You should also challenge any information that may not be correct as this can also impact your score.
Pay your bills on time
Another element of your finances that can have an impact on your loan eligibility and approval is how you’ve managed your finances in the past. If you’ve failed to pay outstanding bills when they’re due or defaulted on a loan, this will show on your credit report. When you apply for a loan, lenders will see this and be less likely to approve your application, as they’ll see you as a risk. To stand yourself in the best position for loan approval, make sure you pay your bills on time each month. You could even automate the payments so you don’t forget.
Reduce debt to income ratio
Your debt-to-income ratio also plays an important part in loan approval. This ratio shows lenders how much of your income is taken up by debt. The more debt you have, the less likely lenders will be to approve your application. This is because lenders will think you can’t afford to take on any more debt, and it could be seen as a risk that you may not be able to pay them back. Keep your debt-to-income ratio low to increase your chances.
Steady Income
Affordability is a big factor for many lenders, especially online lenders that specialise in short-term and payday loans. Showing your lender that you have a steady income means you’re more likely to be approved. If you don’t have a stable income, it may be best to find a job that pays you weekly or monthly to improve your chances of being approved for the loan you’re hoping for.
Add a co-signer
A co-signer can improve your chances of approval for the loan you’re hoping for. A co-signer is someone that has a higher credit score than you, that signs on the loan with you. Your co-signer then takes responsibility for the loan if you fail to make the repayments. This could be a parent, friend, or partner, but it’s essential you make sure they’re aware of the responsibility that comes with this.
