Loans are integral for all people from different walks of life. They provide a helping hand for those in dire need, and they also allow for the attainment of items, opportunities, and more that would be otherwise impossible to get in normal circumstances.
However, moneylenders will still have to verify your ability to pay the loan, and may reject applications that they deem too risky.
Still, if your recent application for a loan to one such agency has been rejected, here’s what you can do to guarantee approval on the next.
Expand your credit history
If there isn’t enough data on your credit history or if it’s empty, most moneylenders will likely be unwilling to lend you the loan amount you requested, especially if it’s a sizable one. The reason being is that without any basis of your history in handling and repaying loans, moneylenders can’t assess how trustworthy you are.
If this is the current state of your credit history, you can address it by opting for much smaller loans at first. Taking these small loans and paying them promptly without fail through monthly installment loans for example, helps build up your credit history and allows you to apply for bigger loans in due time.
Patch up your payment history
Aside from your credit history, moneylenders also look into the details of your payment history. Typically, this is made up of not just credit but also other financial obligations like bills and instalments.
Like credit history, moneylenders check how you handle such responsibilities, whether you pay your dues consistently and on time or tend to do late payments or non-payments. If your payment history consists more of the latter, the moneylending agency will see those as red flags and consider you to not be creditworthy for the time being.
Enhance your credit score
Last but not least is your credit score. As you may already know, your credit score plays a significant role in the approval of your application. It’s a scoring system between 1,000 to 2,000, with the latter meaning that an individual is creditworthy. If your score is closer to the former, your chances of securing loans will be slim at best, and the amount you can take is much lower compared to those with a higher score.
Many factors lead to the reduction of your credit score. The most common ones are making late payments on your loans or completely defaulting on them. To get your credit score back up the scale, it’s recommended to take on credit counselling and learn how to manage your credit lines better.
Even if your loan application gets rejected, there’s still a possibility of getting it approved. You have plenty of ways to improve on the aspects that moneylenders use to judge your application, and they’re all factors that you can directly control. By improving your credit reputation slowly, you’ll eventually be deemed trustworthy enough to take on bigger loans.