When you apply for a loan, your credit score will be just one piece of the information lenders will need to review to approve your loan – according to this Bankrate article by Dr. Don Taylor, a personal finance advisor.
Your credit score is based on the information in your credit report. Lenders can give you an idea of the interest rate you’ll pay on a personal loan from doing what’s called a “soft pull” on your credit report and score, but lenders will want other information as well before deciding whether to approve your personal loan.
Income and employment history. Employment and income verification are important. The lender wants to know you’ve got money coming in to cover the loan payments. If you’re self-employed, income verification may include you providing the lender with copies of your past years’ income tax returns. With online lending, there’s also a need to protect the lender (and the borrower) from identity theft.
Banking relationships. How much money you have in checking or savings can be a point of interest, too. A lender may want to review your bank statements to check on your cash flow. If you’ve got a lot of money in the bank, a loan secured by a certificate of deposit could be an alternative to an unsecured personal loan. If you’ve lived at your current address for awhile, that’s a good sign. If you’ve got a mortgage, that can be something the lender considers in the decision to approve a personal loan.
