Lending Money with Good Credit
With almost every lender around the nation tightening their credit qualifications for loans, those applicants with good credit may still have problems getting approved for money they need. Lenders are placing stricter requirements for lending loans since the rate of default has increased, primarily due to unemployment rising.
Since lending began, lenders have been focused on credit scores that are issued by credit reporting agencies, such as Experian, Equifax, and TransUnion. The Beacon score is popular with lenders; however, a credit score is not the only factor in consideration when someone applies for a loan. Today, an applicant’s character, capacity, and collateral come into effect when underwriters are making a decision on whom to grant credit.
Importance of Good Credit History and Scores
Credit score and credit history can help determine an applicant’s character. These two factors who how the applicant has maintained his or her credit in the past, which is a predictor on how he or she will maintain his or her credit in the future. Underwriters will look to see if accounts have been paid on time, the credit limits on the accounts, whether the accounts were single or joint, as well as how long the accounts were open.
An applicant’s capacity can be determined by his or her income and debt-to-income ratio. An underwriter will investigate how long the applicant has been on his or her job and whether he or she can afford to pay the existing debt that he or she has. In this current economy, having a very high credit limit is a risk that lenders cannot afford to give up. You can expect banks and creditors to cut those limits if you cannot provide enough documentation to prove your income and ability to repay.
An additional factor to consider is using up a majority of your credit, over 50% – 70% when asking for someone to lend you more money. Any sign of risk towards the creditors will affect lending decisions.
Lastly, collateral will be assessed to determine if the applicant has anything to secure the loan. If the applicant is risky for the lender, the lender may require collateral, such as a titled automobile or mortgage.
Those applicants with good credit may not have an issue with getting a loan as long he or she has the capacity to repay the loan. For someone who wants a low interest rate loan, your credit history and repayment ability has to be exceptional.
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