You need more than a part-time job and a limited credit history to secure favorable loan terms today. The days of getting signed on for a home or car loan in one afternoon are over. The application process for all types of loans is becoming more detailed and difficult to maneuver. Lenders are on edge and do not want to take many risks. Most people now find it harder to get loans they want, but most will eventually get accepted.
The key to winning the loans you want for a new car or house is to take steps to make yourself look more desirable to lenders. You want to take out a loan, but that loan must have terms that you can live up to. No one can say for sure 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 History
The first act of preparation is to secure a copy of your credit report from all three credit bureaus. There are three different credit bureaus, so make sure you obtain a copy of all three reports. Some creditors report to all three, but many only report to one or two that they prefer. You will probably find different information presented on all of these reports. Even more important, this means your FICO score could vary with all three credit bureaus.
Most loan organizations and banks will check with all three credit bureaus when deciding if you are acceptable for one of their loan programs. Your scores should be as high as possible, but hopefully they will be above 700. Scores below 700 can reflect negatively on your application, even if it is just one score.
Take action right away to clear up any misreported items on any of your reports. If you have unpaid records for less than a hundred dollars, take care of them if at all possible. If the credit reporting agencies cannot be updated immediately, ask for something in writing stating the debt has been paid in full. Those letters of validation can be shown to lenders as proof you have paid it off.
Eliminate Debt
To increase your chances of acceptance, start paying down credit card debt already established. Lenders look for loan applicants who have more available credit than unpaid credit. The best reports feature open credit accounts that are not maxed out, and which have unused credit. You achieve this by paying off credit card balances, but keeping the lines of credit available.
Make sure your available lines of credit remain open to you. You may need to make regular purchases on some accounts to keep credit open, but you must pay them right back off to establish a low balance. Open credit is a statement that you have been trusted by other lenders, and that you are responsible enough to handle that trust. High credit card balances are a sign of inappropriate use of credit or borrowers living off of credit cards beyond their means.
Stop Applying for Credit Cards
Banks can see how many other credit lines you have applied for in the recent past. When a lender sees that you have recently applied to many different lenders for credit, they know you are searching. They usually cannot see how many of those inquiries led to an extension of credit, but it doesn't enhance your case. Do not try to secure every card that comes your way, or you could hurt your chances of getting the credit line you really do want.
Keep Your Consistent Job
If you have maintained one consistent job for many years, you are going to be looked upon more favorably by lenders. Those with continuous work histories are seen as lower risk 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 sound, so be ready to prove it.
Invest in Your Own Cause
Make your down payment as big as possible. Lenders tend to back away when you want them to pay up without putting your own money on the line. Why should anyone invest in you, when you are not willing to invest in yourself?
If you need some time to work on some of these points, you are right there with most others. If you take the time to get your paperwork in order in these ways, you could escape a denial the first time you apply for loans. It is always in your best interest to take care of these preparations before applying. You do not want lenders to view you as a risk.
The key to winning the loans you want for a new car or house is to take steps to make yourself look more desirable to lenders. You want to take out a loan, but that loan must have terms that you can live up to. No one can say for sure 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 History
The first act of preparation is to secure a copy of your credit report from all three credit bureaus. There are three different credit bureaus, so make sure you obtain a copy of all three reports. Some creditors report to all three, but many only report to one or two that they prefer. You will probably find different information presented on all of these reports. Even more important, this means your FICO score could vary with all three credit bureaus.
Most loan organizations and banks will check with all three credit bureaus when deciding if you are acceptable for one of their loan programs. Your scores should be as high as possible, but hopefully they will be above 700. Scores below 700 can reflect negatively on your application, even if it is just one score.
Take action right away to clear up any misreported items on any of your reports. If you have unpaid records for less than a hundred dollars, take care of them if at all possible. If the credit reporting agencies cannot be updated immediately, ask for something in writing stating the debt has been paid in full. Those letters of validation can be shown to lenders as proof you have paid it off.
Eliminate Debt
To increase your chances of acceptance, start paying down credit card debt already established. Lenders look for loan applicants who have more available credit than unpaid credit. The best reports feature open credit accounts that are not maxed out, and which have unused credit. You achieve this by paying off credit card balances, but keeping the lines of credit available.
Make sure your available lines of credit remain open to you. You may need to make regular purchases on some accounts to keep credit open, but you must pay them right back off to establish a low balance. Open credit is a statement that you have been trusted by other lenders, and that you are responsible enough to handle that trust. High credit card balances are a sign of inappropriate use of credit or borrowers living off of credit cards beyond their means.
Stop Applying for Credit Cards
Banks can see how many other credit lines you have applied for in the recent past. When a lender sees that you have recently applied to many different lenders for credit, they know you are searching. They usually cannot see how many of those inquiries led to an extension of credit, but it doesn't enhance your case. Do not try to secure every card that comes your way, or you could hurt your chances of getting the credit line you really do want.
Keep Your Consistent Job
If you have maintained one consistent job for many years, you are going to be looked upon more favorably by lenders. Those with continuous work histories are seen as lower risk 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 sound, so be ready to prove it.
Invest in Your Own Cause
Make your down payment as big as possible. Lenders tend to back away when you want them to pay up without putting your own money on the line. Why should anyone invest in you, when you are not willing to invest in yourself?
If you need some time to work on some of these points, you are right there with most others. If you take the time to get your paperwork in order in these ways, you could escape a denial the first time you apply for loans. It is always in your best interest to take care of these preparations before applying. You do not want lenders to view you as a risk.
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