So, you’ve pressed ‘submit’ on your application form and it goes flying off to be reviewed by a lender… but what else do they look at?
It’s important that you’re clued up about what lenders look at when you apply for credit, as it’s good to know how to present yourself in a good light.
That’s why we’ve listed the main things lenders look at, and the things they don’t. Without further ado…
What lenders see when you apply
Let’s start with the obvious one… the first thing lenders will look at is your application form. Typically, lenders will ask you about your salary, address and whether you’re a homeowner. This mainly comes down to what’s known as affordability, as lenders will check if you’re able to afford the credit on top of your existing commitments.
When it comes to filling in your form, it’s important to be really careful. If the details you enter don’t match up with those on your credit file, the bank could say ‘no’ straightaway if they’re not sure your details are fully accurate.
Speaking of credit files… the lender will collect details from a credit reference agency, such as Experian, Equifax or Callcredit. These agencies keep track of your credit score and monitor your history of handling money, sharing this information with banks to help them make a decision about your creditworthiness.
All lenders will collect data from at least one of these agencies, so it’s worth signing up to all three to see how healthy your file looks before applying. The information lenders can see on your file can be broken down into these main points:
1) Public court records such as CCJs, bankruptcies and IVAs. If you’ve had problems dealing with debt in the past, these will flag up on your credit file.
2) Where you live When you sign up to vote, lenders will be able to see your current and previous addresses on your file.
3) Applications for credit If you apply for credit, lenders may perform a hard search on you, which can often leave a ‘footprint’ on your credit file. These footprints can be seen by potential lenders in the future, so they’ll see how often you apply for credit; lots of applications could be seen as a red flag on your credit file.
4) Account behaviour Credit reference agencies gather information on your financial history, showing how you manage your accounts – like your bank account or any loans you might have. Banks typically look at this information to see how reliable you are, so they’ll check whether you’ve kept up with your repayments and stayed within your limit, as well as making sure you’ve not defaulted in the past.
Credit agencies generally hold on to all of this information for around six years before wiping the slate clean. As we mentioned before, it’s worth checking your credit file for errors before you fill out an application for credit.
Past dealings with the lender
Believe it or not, your credit file is only part of how lenders determine your eligibility. Lenders all have their own unique lending criteria and will give you a personalised credit score based on a variety of factors, including whether you’ve borrowed from them in the past.
If you’ve got a thin credit history and have never borrowed before, you might find that your own bank might be more likely to lend to you than other credit providers.
What lenders don't see when you apply
Whether you’ve been rejected for credit
You might be pleased to find that – while lenders might see when you’ve applied for credit (if a hard search was carried out) – they won’t be able to see if you were successful or not.
Even so, if you’ve applied for lots of credit in a short space of time, lenders could put two and two together and guess that you’ve been declined credit. That’s why it’s important to seek out eligibility checkers, as these let you know if you have a good chance of being approved before you apply. Eligibility checkers will only leave a soft search on your credit report – which only you can see.
Who you’re married to or living with
If you’re wondering whether lenders will be able to see who your nearest and dearest are, then you may be pleased to find that lenders can’t see this on your report.
Lenders will, however, be able to see who you have a financial association with. In order to be financially linked to someone, you’ll need to share a joint financial product with someone, like a joint loan, account or a mortgage.
Sensitive information such as…
You might be left wondering if lenders know everything about you! Don’t worry – banks won’t be able to see any ‘sensitive’ information about you, such as your race, religion, medical history or criminal record.
Have you got a bad credit history? Or maybe a thin credit history...? Find out what the difference is right here.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.