Have you been approved for a personal loan?
93% of people that applied for a personal loan got accepted, according to our consumer sentiment tracker (November data). That's a higher acceptance rate than credit cards (91%).
When you’re applying for a personal loan, there may be a number of reasons why your application lands in the reject pile. Having a loan application rejected can have repercussions on your ability to access further credit. While there is no fool-proof trick to getting approval, there are a number of steps you can take to avoid rejection.
Your personal loan application may have been rejected if:
To avoid being rejected, you should check the lender's credit requirements. Some lenders may be lenient and allow for a few negative marks, while others will state that your credit score has to be good.
If you're unsure, it's best to check with the lender before applying. You can also check your credit score with Finder for free. This is a soft credit check, and so will not be recorded in your credit history or impact any of your applications.
When you apply for a personal loan, the following is the general series of events you can expect to happen. Keep in mind each lender is different and may have their own process.
A credit check is when the lender checks your credit file for your credit score and details on your credit history. This history includes other loans you’ve applied for and your repayment history. It helps lenders determine what kind of borrower you are – that is, whether you're someone who pays back their loans on time, or someone who has missed credit payments.
Some lenders may provide loans for average score holders, but at a higher interest rate. Others may reject you outright. Your credit score, therefore, may play a role in your ability to get credit and in some instances your interest rate.
When you apply for a personal loan, the lender may make a hard credit inquiry. This is when the lender requests your credit file from the credit reporting agency. The request is recorded on your credit report and can impact your credit score - this is nothing to worry about and simply means you shouldn't apply for many loans all at the same time.
A hard credit inquiry shouldn't be mistaken for a soft inquiry. A soft inquiry is when your credit file is checked for reasons other than lending you money. They have no impact on your credit score and do not show on your file. Soft inquiries can include personal credit checks, insurance and employment applications.
To improve your credit score, you should work on paying all your bills on time, including utility bills. You should also pay off as much debt as you can and lower your credit card limit. This may take some time, depending on your current score, but the earlier you start the faster you'll improve.
Avoid applying for too many loans, as this can further affect your score. Too many applications in a short space of time will trigger many hard credit inquiries, which will further affect your credit score. Select a single lender, the loan that suits you best and for which you’re eligible.
Your credit score gets updated every month, so anything you do to improve it will help in the long term.
Apart from checking your eligibility, income, employment and credit score, it also helps if you:
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