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Kevin Allen, managing director at Close Finance CI, explains the steps people can take to boost their chances of securing finance
A STRONG application with all the required supporting documentation is the most important step in obtaining a loan. However, knowing what constitutes ‘good’ or even ‘excellent’ within the process isn’t always something of which individuals are aware.
If you are in the Channel Islands and thinking about getting a loan this year, here is an indication of what lenders may want from you to support a loan application.
Inclusion of all the basic information
First and foremost, while it may sound obvious, being able to provide the most basic information to a lender will set you on the right track towards approval. Lenders will usually require the following:
- Full name.
- Date of birth.
- Phone number(s).
- Email address.
- Current address and proof of address (plus the last three years of your address history).
- Accommodation status and housing costs (ie mortgage commitments, rental costs, service charges etc).
- Marital status.
- Dependant details (if applicable) including ages of any dependants under 18 years old.
- Employment status, proof of employment, current salary, and information about the last three years of your employment history.
- Income and expenditure details with proof of income (usually by way of bank statements for the previous three-month period).
While questions may vary slightly, the key components of a loan will remain standard. Having all the answers to the above, and verification where needed, will be vital for your loan application. Ensure you have all the information to hand before pursuing a loan.
Credit score
As part of the loan assessment process, lenders will usually undertake searches with credit reference agencies to establish your credit score as this acts as a good risk indicator.
Your credit score is based on how you have handled money in the past. Someone with a high credit score is more likely to have a loan approved than someone with a lower credit score. However, just because you have a low credit score doesn’t mean you will be rejected for a loan. It may mean, however, that you will need to provide additional information to support the application or be offered a lower amount or higher rate of interest.
But what is considered a ‘good’ credit score as this can differ from lender to lender?
The scale is a three-digit number that reflects how reliable you are when it comes to repaying money. Your credit score is calculated whenever you apply for credit such as a loan, credit card, mortgage or even a mobile phone contract. Different companies have different methods of calculation and may use different information but the higher the score, the better the rating.
Locally, the Channel Islands are served by Channel Islands Data Service Ltd and Integricheck who provide credit check and data services in Jersey, Guernsey and the Isle of Man. Lenders in the islands then obtain credit scores from one of the three main CRAs in the UK – Experian, Equifax or TransUnion.
If you find yourself with a low credit score but know that you are thinking about applying for a loan, there are steps you can take to help boost your credit score. These include paying bills on time, enrolling on the electoral register, using your credit card account wisely and keeping utilisation low, and reviewing your credit file and rectifying any mistakes or outdated information.
Affordability
Understanding how much you bring home every month will be an important element of your application, as will verification of salary, so it is suggested that you have this information to hand. The reason that this information is so crucial within the process is so that lenders can be sure that your net income exceeds your regular expenditure with a suitable margin (ie net disposable income) to cover any unforeseen expenditure and that the loan isn’t going to leave you struggling to stay afloat.
Again, the level of net disposable income required will differ among lenders. However, most will ensure that a loan does not negatively impact your ability to live well and afford all your other outgoings.
While applying for a loan may appear to be a long and arduous process, it needn’t be. Knowing what your lender will be looking for in a successful application and having all the required information to hand is a sure-fire way to get to an answer as seamlessly as possible.
