There are all sorts of reasons why you a loan might interest you. Now that the Great Recession is over, you might need a bit of capital to start a new business. Perhaps you’re in the market for a new car. Home improvements are always popular, but can be expensive. You might just want a mortgage to find somewhere to live. Whatever the reason, it’s clear that the world economy runs on loans. Applications for loans are rising again as the economy recovers. Debt, it seems, is back.
Of course, debt isn’t always such a bad thing. Anyone who studied economics at school knows that debts are necessary for all kinds of people. The people who designed our international finance markets built them on the back of debts. You needn’t worry too much about getting a loan. It’s all part of pushing yourself towards a more stable financial future.
What happens if you can’t get a loan? It’s not guaranteed that your application will just sail through. There are all sorts of factors and events that can affect your credit. Sometimes, you may not even know about them until your application fails. That can leave you angry, upset and confused. It’s best to know about the factors that affect your credit score before you apply for a loan.
The most important factor is your payment history. Any financial institution can check your payments to see if you always pay on time. If you miss payments, or pay late, you can jeopardise your chances of getting a loan. It’s all about risk for the bank. They want to make sure that they’ll get their money back fast. If you have a history of missing payments, you look like a risky customer.
Another factor will be the total amount which you owe. If you already have a lot of debts, you might struggle to find new sources of credit. It can be good to be in some debt, of course. If you’ve taken out a loan before, banks look on you in a good light. That’s because they can see that you pay your loans back on time.
These are the main factors, but there are other reasons that can apply. Some of them can seem ridiculous, but they do matter to the bank. Your address can sometimes ruin your chances of getting a loan. It’s a sign of the company you keep – if you live in a bad area, you might not get a loan. If you’ve just moved, it could be a problem as well as you may not be present on the electoral roll. Banks can also look at your job stability. They don’t like uncertainty, and they may take that into account. Your earnings level might also affect your chances of getting a loan.
Managing your finances is the key to getting a good credit score. You need to know the reasons why banks reject loans. If you’ve got the knowledge, you’ll be able to take good care of your finances. You’ll have the best possible chance of getting your loan approved.