When it comes to financial issues, people always make mistakes and unfortunately you might be baffled as to what went wrong- and how to fix it. Nowadays, people only realize their mistakes when they get rejected with their loan application. And to help you learn more about loans and credits, here are some of the few basic facts that you should know:
NO CREDIT. No credit is a situation where you have never used credit and therefore have no credit history for the bank to review. They have no way of making an educated decision on whether or not you will pay back a personal loan based on your credit history. No credit is worse than bad credit. Qualifying for and making regular payments on these types of introductory forms of credit can overcome a “no credit” score.
LOW CREDIT. Low credit takes on several forms. If you’re using more than 30% of your allowable debt, it can negatively impact your score. Too many inquiries from shopping around for loans will also hit you hard. Lapses in payment, defaults, or bankruptcies are giant red flags and can take a long time to rebuild from. Other things that lenders may look at are whether or not you have sizeable assets should you default on the loan. They also check to see if your debts are diversified or if you are only carrying one type of debt.
INCOME. Proof of income is generally required when applying for a personal loan. If you are unemployed or underemployed, it can work against you in the loan approval process. Lenders may also require a work history to see how long you have been with your current employer and to determine if you typically have job stability. Frequent job loss or change will tell a creditor that your payments may not be reliable.
Believe it or not, your application can be rejected due to your proposed purpose for the loan. Financial institutions have the right to set up the parameters surrounding their disbursements and can accept or reject your application based on what you want to use the money for. If you need a loan now but are concerned that you might not qualify for a personal line of credit, you can qualify for a No Credit Check Loan. You could be on your way to a better financial future in no time.