Preapproval is the process of getting approved for a loan before you even apply. Preapproval is essential for people with less than perfect credit scores, as each time you apply for a loan, it appears on your credit report and it can even reduce your score – and if you apply for multiple loans and are declined each time, your score could plummet. Preapproval means that you don’t actually have to apply in order to be approved, meaning that your credit score isn’t affected. Here’s how to get preapproved for a loan.
Know Your Credit
Your credit score is key in getting a loan, but knowing your credit score is not enough. You need to take a good look at your credit report so that you can clearly see what might be putting potential lenders off – and then you can fix it. For example, if there are any errors or mistakes on your file, or if there is any incorrect information, it could lower your score. Incorrect or incomplete addresses and a missing home telephone number could also lower your score, so ensure that all of the information is correct, and if not, change it. Keep in mind that it could take some time to rectify any errors on your credit report, so you should get started at least a few months before you need the loan.
Find a Good Lender
There are literally thousands of lenders out there, many of which will be willing to preapprove you for a loan before you go ahead and apply. Find the right lender for you and you’ll be much more likely to get accepted. If you have poor credit, but a good income, there’ll be a lender for you. Equally, if you have poor credit and a poor income but can prove that you can pay back the loan, there will still be a lender for you. Find the right lender for you and you’ll be much more likely to get preapproved, so do your homework.
You’ll be asked about your income, your outgoings and possibly your tax status when applying for a loan. You’ll also need to have to hand bills that have been addressed to you at your current address in order to prove that you live where you say you live, and you’ll also need to provide information about what you actually want to buy with that loan. If you’re buying a car, for example, outline the model, make, and year of the car that you’re planning to buy instead of just saying, “I want to buy a car”. The better prepared you are, the more of a genuine prospect you’ll appear to be and this should help you sail through the preapproval stage and beyond.
You need to apply to be preapproved; it doesn’t just happen! Find lenders that are willing to offer preapproval status and send out an application. Once you have been preapproved, and once lenders have acknowledged that you’re a safe risk, you’ll be able to go on to apply for a loan without having to worry about it affecting your credit score if you get declined.
Remember, preapproval status doesn’t last forever. Once you’re preapproved, you have to apply right away in order to be considered for a loan. If you wait for even just a few months, you’ll have to start the process all over again, so be quick.