What does my eligibility rating mean?
When you check your eligibility for a loan, the lender may give you an ‘eligibility rating’ for each loan result. This won’t affect your credit score.
Your eligibility rating represents your chance of approval. It’ll be shown as a percentage. The higher the percentage, the more likely you’ll be accepted for the loan. Pre-approval is the highest eligibility rating.
The choice is yours whether you want to go ahead and make a full loan application or keep looking for another deal.
If you do apply, the lender will review your application and carry out a hard check of your credit report. This check will help them make a final decision.
What are the benefits of a pre-approved loan?
There are several benefits to getting pre-approved for a loan before you apply, such as:
- it's an easy process that takes a matter of minutes online
- most pre-approved loans come with a guaranteed APR, so you know exactly what interest rate you’ll be offered
- a soft search doesn’t impact your credit score, saving you from having to make multiple applications if you aren’t eligible for some deals
- if you’re pre-approved, there’s more certainty you’ll be accepted for the loan
How does this differ from a traditional loan offer?
In the past, you had to make a formal application and then cross your fingers and hope you were going to get accepted. Now, you can check your eligibility and get pre-approved before you apply. Checking your eligibility will take some of the risk of rejection away.
This helps prevent you from making multiple credit applications in a short space of time, damaging your credit score and making you appear desperate for cash.
Unlike a formal application, a pre-approved loan isn’t legally binding. So, you are free to reject it for a different loan deal if you like.
How does the pre-approval process work?
The pre-approval process works in one of two ways. You can either:
- receive a notification from your current lender saying they’ve pre-approved you, if they see you as a reliable borrower based on the data they already have on their system
- check your eligibility yourself following the six steps below
1. Decide how much you need to borrow
If you’re looking to take out a loan, the first step is to research what type of loan is best for you. Consider things like how much money you need to borrow, the total cost of borrowing (APR), and how much you can afford to repay.
Unsecured or personal loans can go up to around £15,000, depending on the lender. Your eligibility will depend on your individual circumstances and the lender’s criteria.
Secured loans (also known as homeowner loans) can go up to £500,000. With this type of borrowing, you use an asset, like your home, as security. This means you might find it easier to get approved and access lower interest rates. But the lender could take possession of your property if you fall behind with payments (usually as a last resort).
2. Research loans
You can research loan providers in a few different ways:
- directly – using a lender’s website, over the phone or in person
- using comparison websites – these compare different loan deals for you
- through a broker – these are experts who research different offers for you
3. Use a loan eligibility checker
To find a suitable loan, use an eligibility checker like ours to see how likely you are to get accepted – without harming your credit score. We can compare loans to find the best deal from our trusted panel of lenders.
Checking your eligibility is an important step because it helps you find lenders that are more likely to accept your application.
4. The lender will carry out a soft credit check
Once you’ve entered your details into an eligibility checker tool, the lender will perform a soft credit check on your credit report. They’ll use this basic information to assess whether they’re willing to pre-approve the loan.
5. You’ll be pre-approved or declined for the loan
You’ll either be pre-approved, presented with an eligibility rating, or declined for the loan depending on the results of the soft credit check. If you're turned down, it might still be possible to get a loan with a different lender with different eligibility criteria.
6. Decide whether to make a full application
If you’re happy with the terms of the loan, you can make a full application. The lender will then run a hard search on your credit report and check that the information you’ve provided is accurate.
Loans for all purposes from £1,000 to £500,000
- Get a decision online
- Know your rate before you apply
- Comparing won't affect your credit score
Intelligent Lending Ltd is a credit broker, working with a panel of lenders. Homeowner loans are secured against your home.
Can I be denied a loan after pre-approval?
After being pre-approved on a loan, your full application can still be denied by the lender. This is because pre-approval is based on a soft credit check – the lender is relying on you to provide accurate and up-to-date information.
In most cases, the lender will usually only reject your application if they:
- find out that the information you gave in your initial application was incorrect
- find something in your credit history that makes them wary about lending to you.
How to get pre-approved for a loan
If you’re struggling to get pre-approved for a loan, follow these four steps to maximise your chances:
1. Improve your credit score
You can improve your credit score by making sure you pay any debt you owe on time and in full. This will also improve your debt-to-income ratio and will show lenders that you are a reliable borrower, making it more likely you’ll get accepted.
2. Fix any mistakes on your credit report
A simple thing to do is fix any mistakes on your credit report, such as spelling mistakes or an old surname. Simply get in touch with the relevant lender and/or credit reference agency to ask them to update it.
Mistakes can make it harder for the lender to verify your identity, which could put them off lending to you. Make sure you also report any unknown payments or fraudulent activity on your accounts to your lender straight away.
3. Limit credit applications
It’s best not to make lots of applications for credit in a short space of time. These hard searches all show up on your credit history and can make you look strapped for cash. This can make lenders concerned that you are in financial difficulty and won’t be able to repay the loan.
Instead, use an eligibility checker to check your chances of approval before formally applying.
4. Provide accurate information
Provide accurate information when you fill in the application form. This usually includes your name, DOB, address, employment status, income and outgoings, for example. Mis-matched information can harm your chances of getting approved for a loan, as lenders may think it looks suspicious.
What’s the difference between pre-approval and conditional approval?
Conditional approval is a term that is normally used as part of the mortgage application process. It comes after pre-approval, but before final approval.
If a loan or mortgage is ‘conditionally approved’, it means that the lender has reviewed the application and is likely to fully approve it, but there are certain requirements that need to be met first. For example, they might want to see bank statements to make sure that the borrower can afford the repayments.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Adele Kitchen
Personal Finance Writer
Adele is a personal finance writer with more than 10 years in the finance industry behind her. She writes clear and engaging guides on all things loans for Ocean, as well as contributing blogs to help people understand their options when it comes to money.
