Real Estate

So You Want to Apply for a Loan?

Story Published on July 17, 2008 ⋅  Email this Story ⋅  Print this Story ⋅ Post a comment ⋅

When doing research for a loan make sure you don’t actually apply for several loans at one time. This is because, if you make several full scale applications, these will leave a credit search record on your credit file. Multiple applications often indicate multiple refusals, so new lenders looking at these records will probably assume that other lenders have turned you down and may follow suit.

The best way forward then is to try and get loan agreements in principle without having the full credit search. Then compare whats on the table and apply for the loan that bests suits your needs. If a lender turns you down then you MUST find out why. Lenders are not required by law to tell you why you were refused but in reality most lenders will give their reasons. It is vital to get the reason for refusal and check the reason is valid before you consider applying for another loan.

Lender’s requirements. A lender needs to be as sure as possible that you can handle a loan responsibly and therefore if you have not borrowed money in the past you may find it difficult to get the best rate available. This is because your lack of a borrowing track record makes it hard for the lender to judge how reliable a customer you might be.

If you can show that you are capable of managing your money properly, maybe by having a credit card and a mobile phone and keeping them in good standing then possibly this might bring the best rate loan offers closer to you

Make sure you are not overstretched. Lenders always look at your credit file to see how much you have outstanding on credit cards, mortgages and loans. They can easily see how you are handling payments. They will also look at your credit limits. Even if you are not currently borrowing on all your credit cards a lender could possibly get nervous about lending you more if he fears you might go on a spending spree. It’s probably better therefore to close credit card accounts that you don’t need.

Explain your special circumstances. If you have a bad credit record, or you are currently having some financial problems, it makes a lot of sense to seek advice rather than simply borrow more. If you have ever missed repayments in the past they remain on your credit record for at least 36 months. IVAs, Court judgments and bankruptcies stay on the record for at least six years.

If Special circumstances have affected your performance on a finance agreement in the past then explain these circumstances. For instance if you have been ill or had an accident and this affected your earnings and therefore your ability to pay temporarily you can make a note on your credit file and lenders will certainly consider this when looking at you for a loan

There are companies out there claiming they can repair your credit report. Stay away from these companies. Repairing your credit report is not possible unless someone made a mistake. If a mistake was made then you can repair your credit report yourself easily sp beware of these shysters, you will only end up being more out of pockets for something that simply isn’t possible.

Don’t borrow money to simply ease your current difficulties. Borrowing more means paying more back and you could be simply multiplying your problems. Review your spending first and try to trim any unnecessary spending before simply adding to your debts.

One very simple and quick way to improve your credit rating is to register on the electoral roll if you aren’t on it already. Credit reference agency Experian tells us that lenders use the electoral roll as a precaution against fraud, to help check that you are who you say who you are and live where you claim to live. If you are registered at a different address to the one on the application form, or don’t appear on the electoral roll at all, they may ask for proof of residence or could simply turn you down.

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