Why Is Your Credit Score So Important For Loan Approval | Floss CU
Why Is Your Credit Score So Important For Loan Approval

Why Is Your Credit Score So Important For Loan Approval

Almost every lender will ask to see your credit score when you apply for a loan. Checking the credit score has become a standard procedure for the lender to determine whether you are a financial discipline borrower who will pay back on time. It can be hard to get approved for the loan amount that you apply for if you have a poor credit score as it shows that you are an unreliable borrower.

The three-digit credit score is calculated based on the payment history on your credit report. The FICO (Fair Issac Corporation) credit score is the credit score system that most lenders will check. The FICO score system has a range of score from 300 – 800. the higher the score, the higher the loan amount you can get approved for and the lower the interest rate that you will get.

Most of the time, the lender will approve borrowers with credit score in between 620 – 750+. It is possible to get a loan even when you have a bad credit. People with good/excellent credit score from 700-750+ can easily get qualified for interest fee less than 10%.if your credit score is in the middle to the upper end of 600, you can qualify for interest fees around 12%. People with credit score in the lower range of 600 can qualify for an APR interest of 15.99%-17.99%. People with bad credit can apply for bad credit personal loans that have high APR interest fees.

You can save money on loans when you have good credit score. To maintain a good credit score, you must always pay your bills on time. To ensure that you always have enough money to pay your bills, you should eliminate the unnecessary expenses. If you owe money on existing credit cards, you should pay them off before applying for the loan. After paying off your credit card debts, you will be able to notice an increase in your credit score.

You should order a copy of your credit report from the credit bureau and review it for errors before applying. If you correct the errors on your credit report, you will be able to increase your FICO score by a few points which will then enable you to become eligible for a low-interest personal loans.

There are many personal loans with different interest rates so you’ll need to shop around to find the one with the best interest rate. Every lender has different minimum credit score requirement. You can get pre-approved for the loans and find out the interest rate that you will qualify before going ahead to apply it. It is important to only apply for the personal loans from legitimate lenders. Illegitimate lenders will often advertise their loans as no credit check loan. These loans are not personal loans but payday loans with the short loan term of 2 weeks to 1 month and exorbitant interest rates.