Borrowing more than $10,000 from an online lender is considered as a big sum. This makes it all the more necessary for you to have a good credit score if you expect to get approved for the loan fast. The credit score is a score in your credit report calculated based on your activity in regarding to financial management.
Many factors are taken into account when calculating the scores including number of accounts, outstanding debt, bankruptcy, and late payments. There are many different levels of credit rating including poor, fair, good and excellent. Having at least an average credit score (620 – 659) is needed to obtain a loan. If you have good (660 – 749) or excellent (750 – 840), it will be easy for you to get approved for a low interest rate when you apply for a loan.
Everytime you make payment for a bill, the company will report it to the credit bureau. Various types of bill payment can affect your credit score including internet, cable, phone, landlord, credit card, and insurance. Not paying a bill can cause you to lose score. If you are on time in paying your bill every time, the score will keep increasing bit by bit.
Those who have a long history of good financial habits, for example paying bills on time, not opening too many accounts at one time, low debt to income ratio, will have a good credit score. Therefore, by taking a look at your credit score, the lender is able to determine whether they can trust you in paying back the loan promptly.
With a good credit score, you don’t have to worry about paying high- interest fee when you get a loan. They will give you a low rate which makes it easy for you to pay off the loan fast. If your credit score is low, you should focus on paying your bills on time starting from now.
You should avoid getting new loan when you have a low credit score. This is because you are already having financial problems and will end up in worse financial situation when you take more loans. If you have existing debt, you should try to clear them off before applying for a new loan.
When you apply for a loan, the lender will check the database to see how much existing debt you have. Having more debt than your personal income can result in your loan application getting rejected. As a rule of thumb, you should maintain your existing debt to only 25% of your income.
Prior to applying for a loan, you should first get preapproved by filling the loan request form at the loan comparison site. Getting preapproved allows you to find out your estimated interest rate so that you can compare carefully and make the right decision.