by Lyle Daly | Feb. 5, 2019
Need a loan and worried that you could get denied? Follow a few pieces of advice and you can dramatically improve your chances of getting approved for a personal loan.
Despite how common it is to apply for a personal loan, it’s still one of those situations where you second-guess whether you’ll get approved. After all, you’re asking a company to give you thousands of dollars.
What you do before you apply can make a big difference in your chances of getting approved for a personal loan. Fortunately for those of us who don’t like to wait around, you can get started on improving your odds today.
In this case, you’ll want to check both:
The reason you should pull your credit reports is to check them for errors, because any errors can drastically affect your credit score. If you notice an error, you can contact the creditor that reported it and dispute it with the credit bureau online.
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Your credit reports will not, however, have your credit score on them. You need to know your credit score so you can verify that you’ll meet a lender’s minimum requirements. Most lenders look at your FICO® Score, so make sure you’re checking that. Many of those free credit score sites only show you your VantageScore, which won’t be as useful.
Debt, particularly credit card debt, can make it more difficult to get approved for a loan. Before you apply, you should work on paying down your debt as much as possible, starting with your credit card balances. There are two ways this will help your loan application:
A hard credit inquiry is what happens when a company pulls your credit to decide if it’s going to approve you. There are all kinds of circumstances that can involve hard credit inquiries -- loan, mortgage, and credit card applications are the most common, but you could also have a hard credit inquiry if you applied to rent an apartment or open a new cell phone plan.
The reason you want to avoid hard inquiries before applying for a personal loan are two-fold:
Try to go without any hard credit inquiries for at least three to six months before your loan application.
There are many different varieties of lenders out there. Some focus on high-income applicants in need of low-APR loans, whereas others are geared towards consumers with bad credit or consumers who haven’t built much credit history yet.
Finding the appropriate lender is important so that you don’t waste your time or your money. If you apply with a lender when you don’t meet its credit score or income requirements, you’ll likely get a denial and a hard inquiry on your credit file. If you have great credit but you apply with a lender intended for bad-credit borrowers, you’ll probably get approved, but at a higher APR than you could have gotten elsewhere.
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To help you choose the best lender, we’ve put together a page with the best personal loan providers for all kinds of financial situations. It also includes a tool where you can plug in your credit score, zip code, the purpose of your loan, and your desired loan amount to check which lenders will fit your needs.
If you don’t have excellent credit, the best way to improve your chances on a personal loan application is to find a cosigner who does. When you apply with a cosigner, it’s essentially as if that person is applying for the loan. They’ll also be responsible if you miss a payment or default, which is why people can be wary about cosigning.
The most important factors in your chances of success with a personal loan application will be:
With the right strategy before you apply, you can definitely improve in some of the areas lenders will look at and make yourself a more approval-worthy applicant.
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