When there was no Internet and no websites to give information, people who wished to borrow had to submit a ton of applications. This would leave a footprint on their credit file, showing to which lenders they had applied for a loan. In today’s digital age, it’s possible to quietly do your research and only apply where you’re likely to get through. Checking your loan eligibility effectively lowers the risk of a poor credit score due to many credit searches. Because very few sites felt the need to explain loan eligibility to get loans without guarantor, we decided to blog about it.
What Is Loan Eligibility?
Loan eligibility is the chances of being approved for a specific loan deal from a lender. A perfect match happens only when your credit history suits the lender’s criteria. Earlier, one had to give their personal data to a number of lenders who would search your credit file and leave a footprint. This would lower applicants’ credit score and make credit inaccessible in future. Nowadays, you can check your loan eligibility without letting it affect your score. This is also a ‘soft search’. There’s no harm in trying to find out where you qualify. The top credit reference agencies (CRAs) in the UK like Experian can help you see your rating for credit cards and personal loans. It shows how much percentage chance you stand of a lender accepting you.
How Is My Loan Eligibility Calculated?
Every lender has a set of criteria they use to filter applications. So, you see, those of the high-street can be quite choosy. Complex algorithms compare your credit history with lenders’ criteria and generate a loan eligibility rating. For this, many parties might be contacted but it’s a soft search and doesn’t show up anywhere on your credit file. It won’t impact your score.
Your credit report includes:
- How much debt you already have, e.g. mortgage, credit card
- Whether you make payments regularly and on time
- Number of credit accounts and how old they are
- Credit limits and how you use them
- Whether you’re registered on the electoral roll
- Your financial associates with whom you share finances
- Information in the public domain, e.g. DMP, CCJ
What Are Lenders’ Criteria And How Does It Affect Loan Eligibility?
Criteria are the basis for lenders to approve customers. This varies a lot between lenders and deals. A lender will check your loan eligibility to see whether to provide credit to you or not. They’ll look for:
- Your recent applications for credit
- Balance outstanding on other credit accounts
- History of missed payments
- Whether you’re in full-time employment
- Your monthly income
For this information, they will usually check:
- Your credit report
- Your application form
- Data they have about you e.g. if you’ve been their previous customer
Apply for short term loans now without checking your eligibility
How Do I Check My Loan Eligibility?
To see your loan eligibility on a website like Experian, you’ll need to decide which financial product you want- personal loans or credit cards. The good news is that it’s free and doesn’t affect your credit score in the least.
Before embarking on your search, narrow down your choices to:
- The type of credit card you want
- Your choice of loan term, borrowing amount and purpose of borrowing- car loan, home loan, wedding loan, home improvement loan, holiday loan, etc
While comparing your loan eligibility, you may have to provide personal details and also reveal a bit about your finances. This is just to confirm your identity and access your credit information to calculate loan eligibility rating.
For faster comparison, consider creating your account with one of the top Credit Reference Agencies. So, the next time you want to check how you fare with loan eligibility, you won’t have to input your details. This is practical and useful as your loan eligibility might just become better, making you come back to compare new offers.
What Does The Loan Eligibility Number Mean?
Your loan eligibility appears not as a number but as a percentage next to each search result of personal loans or credit cards. It shows the likelihood of being accepted for that credit deal. Of course, the higher your loan eligibility, the better your approval chances. You may also spot a pre-approval label beside some deals- this is your best eligibility rating among all others. That means, if you apply for this loan, you’re highly likely to get it at the rates displayed. However, this is just an indicator and not a guarantee of approval from that lender.
Is It Beneficial to Check My Loan Eligibility?
Knowing your loan eligibility comes with a lot of advantages. Some of them are:
- Save time:
You can filter out suitable deals and don’t waste time applying for those with which you have a low loan eligibility.
- Save efforts:
You just submit the one right application instead of tons that will anyway be rejected.
- Get better deals:
As you’re essentially checking your loan eligibility against deals and loan providers, you’re doing a comparison. This will ensure that you choose the most affordable and valuable loan.
- Protect Your Credit Score:
As you don’t apply at too many places, only a few select potential lenders will look at your credit score. Fewer searches mean fewer black marks on your report.
- More Privacy:
You don’t need multiple lenders getting access to your personal and credit details when they’re unlikely to give you credit.
Tips To Improve Your Loan Eligibility
There’s only one way of looking better to loan providers- by improving your loan eligibility score. You can do this by implementing these tips:
- Prove your address is genuine- register on the voters list
- Build your credit history- borrow small amounts and pay them back
- Be a reliable borrower- set aside money for monthly repayments
- Keep within the credit utilization limit- ideally it should be 25%
- Limit credit applications- only one every three months
- Close unused accounts- don’t have a lot of available credit
- Borrow what you can afford- avoid CCJ, IVA and bankruptcy
- Look out for loan sharks- monitor your credit report
Can you get a personal loan with a credit score of 550?