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When trying to maximise your chances of being approved for a loan, there are a number of things that lenders are looking for including your credit score, making sure that you give accurate information and that you meet the criteria. Capital Bean offers its personal insights below:


Have a good or fair credit score

When you need to borrow money, the better your credit score, the easier it is to be approved for a loan.

A person’s credit score shows their creditworthiness and how likely they are to be able to repay the loan. Thus, the higher the score, the less risk it is for the lender and the more likely they are to lend the money with reasonable terms.

Most major loan providers will look at a borrower’s credit score before determining whether to lend them money. This does not necessarily mean that if the borrower has a less-than-perfect credit score they will be rejected for the loan; however, it means that if they are approved, the terms may be less favorable (for example, shorter repayment period and higher interest rates).

If you are concerned about your credit score, there are ways that you can build credit before applying for a loan.


Look for errors in your credit report – mistakes are often made on your credit report which, although small, can have a big impact on your credit score. You should always check your credit report to make sure that it is an accurate reflection of your finances. In particular, you should look for any closed accounts still being shown as open, wrong accounts and incorrectly recorded credit limits.

Manage your finances – in the months leading up to applying for a loan, your finances become increasingly important. This is something that lenders will look at so it is important that you are spending sensibly and that your outgoing payments are not outweighing your income. Lenders typically look at debt-to-income ratio meaning that if your debts are substantially more than you are earning per month, it shows that you are unlikely to be able to afford the additional debt of a loan.

Increase credit limit – this may seem like a risky move if you are already worried about your credit score; however, if you are able to demonstrate regular and timely repayment with a higher credit limit, this could be more compelling for lenders. You can request a credit card limit from your credit card company and are more likely to be approved for this if you have regularly met payments or if your income has increased since taking out the credit card. Before taking this action, check with your credit card company if it is a good idea.


Key Points

  • If you are concerned about loan approval, there are ways to improve your chances
  • Waiting to apply for a loan can benefit you as it gives you a chance to prepare things well and build credit
  • Save yourself disappointment by making sure to double-check your application and avoid careless errors



Give accurate information

When applying for a loan, you should be as honest as possible about your financial situation. Giving inaccurate information can create long-term problems both for the borrower and the lender. Before submitting anything, you should make sure that there are no errors in your application. That means basic information, such as name, social security number and income, should always be checked.

Aside from the basics, you should be accurate when stating the purpose of the loan, your financial situation and how much you are wishing to borrow. All of this information will help you find a lender to match your specific profile. Loan terms are agreed between lenders and borrowers based on what is affordable for the borrower to pay back so misinformation is only going to harm your application in the long run.


Make sure your meet the basic criteria

Remarkably, so many customers do not check if they meet the initial criteria of the lender or the product they are applying for. This information can usually be found on a company’s website or FAQs page for instance. You usually need to be employed and earning a minimum amount each month to be eligible.

If you are unsure about your circumstances, you can always simply contact the lender and ask i.e do you consider people on benefits, in between jobs, living with parents etc

There are other factors such as being a resident of the state you are applying in and asking to borrow around 25% of your gross monthly income. For instance, if you earn $1,000 per month and request a loan of $5,000 in a month, this could be hard for a lender to justify. And most lenders, certainly in the payday space, only offer a maximum of 25% of your monthly income.


Avoid multiple applications in a short period of time

Multiple credit inquiries does not necessarily have to be a bad thing, but you should always keep track of just how many credit inquiries you are making in order to stop them building up. This is because multiple applications can negatively impact your credit score.

In general, financial professionals recommend a minimum of six months in between credit applications. By this point, the first inquiry will not be as visible on your credit report and you will have had time to improve your credit score.

Applying for credit or a loan will hurt your credit score so the fewer times you need to do it, the better. If you do it too many times, you can damage your credit score and reduce your chances of approval for the loan or credit.

Some loan providers, for example for loans such as payday loans, will only carry out a “soft” credit check. If this is the case, it will not damage your credit score. Before making an inquiry, you should always see whether the company will be carrying out a hard or soft credit check. It is the company’s responsibility to disclose this information.

As a guideline, financial experts suggest that six or more inquiries are too many and can have a detrimental impact on your credit score.



Maximise your chances of loan approval by taking care to avoid errors on your loan application.


Be readily available to respond

After submitting an application, make sure you are readily available to be contacted, be it by phone or email. Sometimes, depending on the lender, they may want to reconfirm certain information or request further documentation. The quicker you are able to respond to this request, the more likely it is that your loan will be approved. If you are able to respond quickly, it means that should any issues arrive you are well-placed to address the problem as quickly as possible. Fast responses will also ensure that the lender is keeping your loan application active so that it can be processed in a timely manner.

Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

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