It’s been in the news for what seems like forever and we’re constantly reading about it in newspapers and magazines; the banks are giving out significantly fewer loans, credit cards and mortgages than they used to and that’s making life a little more difficult for nearly everyone. Factors such as your credit score and your financial history are instrumental in whether or not a bank will consider you for a loan; unfortunately, some of us are unaware about exactly what will affect the success of our application. Don’t panic, here’s a quick guide to what a bank or lender will look at and what it won’t look at when considering your application.
What Will Banks Look At?
– Length Of Credit History
A bank will look at how long you’ve been borrowing money and repaying (or not repaying!) loans or credit cards; of course, if you’re just starting out in the financial world then it can be difficult to get a loan as there’ll be nothing for a bank to refer to and assess your application with.
– Payment History
This is a ‘biggy’ and can have a significant impact on how successful your application will be. A bank will look at whether you have previously repaid your loans in full and on time or whether you’ve been late or missed any payments.
– Credit Reference Agency
Credit reference agency files will show a bank whether you have any outstanding court records such as a CCJ and will look at CIFAS to see if you’ve previously been involved with fraud.
– Application Form
One of the most important aspects of your application is obviously your application form. It is here that a lender will assess your salary, the reason for your loan, the size of your family and whether you’re a homeowner. Be careful not to make any mistakes on your application; check it, check it and check it again!
What Don’t Banks Have Access To?
Banks, of course, can only look at certain things to determine whether or not to lend to you; there are always a range of factors that banks and lenders will not and cannot use in the decision making process. These factors include:
– Ethnicity & Religion
Banks won’t look at and will not care about what ethnicity you are or what religious beliefs you hold as this will not affect how likely you are to repay a loan.
Although a bank will not look at age in their decision making, it is entirely possible that your age will pay an important role in whether or not you are successful in your application. A young person is unlikely to have an established credit history and is therefore, less likely to be accepted for a loan; whereas an older person will usually, but not always, have a much more diverse and comprehensive history which is normally more appealing to a lender.
– Criminal record
A criminal record will not affect your loan application as banks do not have access to this sensitive information; they do, however, have access to your financial record. For example, if you have been issued with a CCJ or have been declared bankrupt in the past six years, a bank will be privy to this information which could affect your success.
A bank does not have access to your salary but will nearly always ask you to tell them your salary in the application form; the important thing is that they do not have access to this information unless you tell them.
– Previous Applications Elsewhere
This is an important one. Banks will know if you have been applying for loans or credit products elsewhere but will not know if you have been successful in these applications. It is of course possible, however, for a bank to determine if any were successful by looking at any accounts you have opened.
Remember that every bank and lender will differ in their approach to money lending; the criteria and checklist for their ‘ideal candidate’ for each lender is often very different so a rejection from one company doesn’t mean that you’ll be rejected from them all!
Please remember to read all risk statements and consider if the Representative APR is appropriate for your needs before entering into any loan arrangement or you can obtain the OFT booklet “Think before you borrow” by following this link http://www.oft.gov.uk/shared_oft/consumer_leaflets/credit/oft319.pdf
This article was written by Jennifer Griffiths on behalf of Aspire Money; providers of bad credit loans to give you a helping hand when times are tough, even if you’ve got poor credit or a CCJ.