What Lenders Look For When Approving a Loan?

The first thing lenders look for when deciding to approve or deny a loan are Fico scores.?There are 3 National Credit Bureaus# that report these scores: Equifax, TransUnion and Experian.??Each individual Bureau captures detailed credit histories on US Consumers and calculates Fico scores# that are meant to predict creditworthiness.?Credit scores range between 300 Poor- 850 Excellent.?The higher scores have the best chance of being approved for a loan at a lower interest rate.

The Credit Bureaus use 5 categories in determining a credit score and each carries a % of importance towards the final score.?For example: Payment History 35% (on-time payments vs. late payments), Debt Load 30% (% of available credit vs. credit limit), Length of Credit 15% (Age of credit accounts), New Credit 10% ( Inquires and new accounts opened in the last 18 months) and finally diversity of credit used 10% (Installment and Revolving account mix).

Boost Your FICO Score

Before applying for a loan or funding it would be wise to review your credit report# for the 5 categories I mentioned above.?There are some simple steps to follow to repair negative items on your credit report.?

·??????1st is to verify information with Credit Bureaus and Creditors.?Any incorrect data could be grounds for removing negative items.?

·??????If you had late payments in the past, sometimes they can be removed by contacting the creditor (if you are currently in good standing with that account).

·??????On Revolving accounts pay down to under 35% utilization or maximum credit limit.

·??????Length of your Credit, do not close old accounts.

·??????Keep new credit applications to a minimum. ?Applying for credit often, could cause hard inquires on your credit report.?

·??????Pay-off accounts that can be easily settled and removed from your credit report.

·??????Become familiar with Credit Time Clocks and when negative items should fall off your credit report, For Example: Inquires should be removed after 2 years and collection accounts, 7 years.

When seeking a loan to purchase a car, home or any type of funding, it is important to understand what is on your credit report.?There are many websites that offer free reports to consumers without the negative impact.?Verify items on your credit report are correct with Credit Bureaus and Creditors.?If you find any false or incorrect information, challenge them by mailing letters or making phone calls.?Finally use FICO# boosting# strategies (previously mentioned) to improve scores.?Remember a jump in your credit scores could save you thousands of dollars a year in interest on that next purchase.