Improve My Credit to Ensure I Can Get a Loan?

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Securing a loan can be tricky, especially in today’s turbulent economy. Luckily, the process of assessing credit risk is fairly standard, so there are many ways to improve credit in order to ensure getting a loan.

Credit risk is determined by banks and other financial institutions by looking over a consumer’s past credit history and making estimations about their behavior in the future. In other words, if you have a history of not being reliable, the bank will not give you a loan as you are not a good investment on their part. In order to be a better investment for the financial institution, credit must be improved.

Ways to Improve Your Credit

Credit can be improved in a major way by staying on time. This means paying all bills on time and completely, from credit card payments to the monthly cell phone bill. If you consistently pay on time and the amount required, you will be regarded as a reliable consumer.

Another way to improve your credit is to open accounts and keep them open. You will not get a loan if you have a list of maxed out credit cards, or are known for opening credit accounts and quitting them after a short term of use. Long lasting, repetitive use of accounts will establish a notion of consumer fidelity, improving your credit and your chances to get a loan.

Concerning documentation, you should constantly check your payment records both online and in paper for when you apply for a loan. This way, if the financial institution somehow makes an error, you will be well prepared to provide proof of your adherence to excellent practices. Therefore, it is important to maintain good credit by monitoring oneself.

A few credit cards with timely pay schedules and fairly regular use, including not overcharging the account, will bolster your chances for getting a loan. You should take care of your credit history as something that will always follow you, so avoid doing things like refusing to pay or declaring bankruptcy, as this will remain in your credit history and affect your loan applications in the future.

Lending Criteria for Loans with Poor Credit

Filed under Credit

In a perfect world, we would all get the loans and be able to repay them back in required time. However, some of us have poor credit backgrounds and getting a loan is almost impossible. But did you know that whether you have good credit or poor credit, the criteria for a loan is basically the same. The real difference is going to be the rate and term. Another variation is that you are also going to be required to provide additional and more comprehensive documentation. Having poor credit and getting a loan will just demand more preparation and documentation to support your case.

Poor Credit Loan Documentation Criteria

Whether you are asking for $1000, $30,000 or $50,000 with poor credit, start collecting the documents. Here are some examples of the criteria and documentation you are going to need to apply for a loan with a poor credit background:

• Pay Stubs – you are going to need to provide at least the last 30 days of pay stubs. Four consecutive weeks of work will typically satisfy the employment criteria for your lender.
• Tax Returns – you are going to need to make available the last two years of your tax returns. Tax returns will be evidence of employment as well.
• Drivers License or State ID
• Social Security Card
• References – you will need at least three references with their name, address, and phone number, the lender.
• will most likely verify them so make sure they are accurate
• Bank Statements – you will need three months worth of bank statements. Contact your bank for old statements in advance. If you have an online bank account, 6 months of statements are usually available.
• Collateral – Banks and other lending institutions want something in exchange for a loan in case you default. By giving collateral such as your home, car title, motorcycle, or boat, you increase your likelihood of getting a loan with poor credit.
• Bankruptcy Papers – you need to show your bankruptcy discharge papers, if applicable.
• Letter(s) of Explanation – you may be required to offer in writing letters of explanation on why your credit is less than perfect

One thing you will need to keep in mind is that you need to be honest with the lender. If your credit is poor because you took on too much, then tell them that. Bluffing your way through an application will only get you denied. At this point your credit scores is not what they are basing their decision on; it is you, what happened, and the collateral you can offer. Remember you are providing the lender with needed documentation for a poor credit loan.