When you apply to borrow money, lenders will look at your credit score before deciding whether to accept your application.
Your credit score is calculated using a points system, based on what’s in your credit report. It shows lenders how reliable you are at borrowing and repaying money.
A good score can help you get approved for a loan, while a poor score can stop you getting approved. Your credit score can also help lenders decide how much to offer you, as well as the interest rate.
There are ways you can improve your credit score and increase your chances of getting accepted for a loan. This includes joining the electoral register and making sure you pay your bills on time. Any late or missed payments can negatively impact your credit score.
It can be a good idea to check your credit report to make sure the information included is accurate, and correct any mistakes before you apply for a loan.
Any wrong information in your credit report can affect your loan application.
You can check your credit report for free, as many times as you like, and it won’t affect your credit score. It’s only when lenders do a hard credit check (typically once you apply for credit) that it affects your credit score – not when you check it yourself.
Remember – your credit report won’t tell you whether you’ll be approved, as lenders consider several factors when making a decision. If it’s a joint loan you’re interested in, both applicants may want to check their credit reports before applying.
When lenders receive your loan application, they’ll typically do an affordability check – to see if you can afford the monthly repayments. They may review your income and outgoings, including any existing debt commitments.
It’s important to create a budget to see how much you have left over each month – and avoid borrowing more than you can afford to repay.
To apply for a loan, you’ll need to meet certain conditions, such as minimum income requirements. This can vary between loan products as well as lenders.
It’s important to check the terms and conditions to make sure you only apply for loans that are suitable for you – to avoid your loan application being rejected on these grounds.
A small mistake can impact the outcome of your application. For example, if you live in a flat, your address may need to be written as Flat A, 123 High Street rather than 123A High Street. Before hitting submit on any application, make sure everything's completely accurate.
Multiple applications in a short period of time can give the impression that you’re having trouble managing your money – and negatively impact your credit score. So, it’s worth doing research to make sure a particular loan is right for you before applying.