What Do Lenders Look At When Lending?
Typically, people believe that if you do not have a good credit score a lender will not even consider lending to you. But, is that really the case?
Lenders look at multiple things when lending to those who have applied. If somebody fits their criteria, they still have to be cautious and cannot automatically lend to them. This is because they have to ensure that a loan is a right choice for you. So, what actually do lenders look at when lending?
Your Credit Report
Your credit report is the most important aspect to lenders when you are applying for a loan. It is made up of multiple different aspects which give the lenders answers which they need without having to ask the customer. It includes necessary aspects including things like:
- Your personal information (Name, Date of Birth, Current/ Past Address)
- Public Records (CCJ’s, Bankruptcies)
- Accounts / Financial Agreements (Payment History, Loans, Credit Cards, Late Payments etc…)
When you apply for a loan, the lenders will take every financial aspect into consideration. This is where your credit report comes into place. Before accepting you, all lenders will conduct a credit check to ensure you are eligible. They will look at all of the necessary details which are important in this situation. Therefore, having a good credit score and report is definitely a bonus.
Your credit report also shows payment history including late payments. When you apply for a loan, the lender wants to ensure that they know you will be able to repay the loan with no issues. Therefore, if your credit report shows late repayments, the lender will be more cautious and may not feel like it is best to lend to you. Similarly to outstanding debts, if you are in a lot of debt, lenders may feel like you are too much of a risk, or a loan is not right for you at this moment in time.
Your Credit Score
As you can see, your credit score is not the only thing which comes into play when a lender is considering your application. Although, this goes hand in hand with the credit report section as a lender looks at your credit score to determine your creditworthiness.
Your Income & Expenses
Lenders might want to get a rough understanding of how you manage your money. This is to see whether or not you would be able to financially deal with the monthly repayments of a loan. If you have more money going out then coming in each month then that is a negative sign to the lender as you may not be managing your money to the best of your ability. Therefore, you will be able to you may be able to turn to something more beneficial inducing a better management plan.
Looking at your income is essential as the lender needs to work out whether or not your income will work with the size of the loan you are wanting. For example, if you are wanting to borrow a payday loan of £1,500 and then repay it over the course of 6 months but you only earn £1000 a month then it may not be the best option for you. Although, in a similar situation, instead of being completely denied from the loan, you may be able to increase the loan duration to allow you to repay the loan at an easier pace.
Will You Still Get Considered Even If You Have A Bad Credit Score?
The simple answer is yes. There are a lot of lenders out there who can help you find or even offer you bad credit loans. Everybody is suitable for a bad credit loan, meaning that everybody can apply.
One of the positives of getting a bad credit loan is that if you manage to repay the loan on time, your credit score will increase therefore helping you in the future.
These are only some of the aspects lenders look at when lending. There will be different things which different lenders view depending on the company and which type of loan they offer. For more information on a specific lender, you should try and find answers on their website.