Loan Application Approval Criterion

When applying for a new mortgage or refinancing, it is expected from the lending company to look into the financial records of the applicant. The credit scoring, the ability to earn and the value of the property (for refinancing) are scrutinized. These are the factors that will determine if you will be able to handle the monthly payment without having any significant affect in your lifestyle or monthly financial standing. They will be more than happy to approve those who can pay timely but the lender will have doubts if you have records of non-payment.

But lenders today are increasingly getting pickier in their applicants. If there is something recession has taught the lenders, it is the fact that they cannot just give out loans hoping that the person would pay eventually. Obviously not everyone paid their mortgage which left the lender with billions of dollars in losses.

For that reason, the standard factors in determining the approval of a loan application still stands but with a few additions. Do take note of these additions because one of these factors could single-handedly discourage the lenders in approving your application.

Credit Card Usage

When the lender pulls out your credit score, they can pull out each credit card transaction you would have. This will give them the bird’s eye view on how you use your credit card. Don’t think that just because your credit rating is good, the lending company will approve your application.

They will scrutinize every financial transaction you have and take note if there are any purchases you have that ended up in dispute. There are consumers that dispute almost every charge they have in their credit cards and this is not a good sign to the lenders. Yes, you pay on time but you give the collectors a hard time getting what you owe.

Lenders would also take a look at the type of credit card that you usually get. For example, if you’re credit card is usually the store offered credit card, expect a negative reaction from the lenders.

In gist, every transaction that you did with your credit card will be scrutinized. Your transactions as well as your relationship with the issuer will be under serious investigation. They don’t want to deal with someone that gives them a hard time collecting the monthly bill.

More than FICO

The acceptable measurement in credit scoring is based on FICO system. But lenders today are not content in looking on your FICO score alone to determine your worthiness for a mortgage loan.

The following are some of the scores the lenders will be looking when you apply for a mortgage loan:

• Bankruptcy Score – This is a little bit pessimistic in their end but this is just a way of protecting their interest (and probably yours). Bankruptcy score is basically a number that tells if there is a possibility you’ll be declaring bankruptcy in two years or less.

• Application Score – Every time you visit a bank, a credit card issuer or any company that offers services requiring credit scoring will be recorded. The approval rating of your application could be used as a factor against you if you are consistently denied with different services you seek to obtain.

• Response Score – This is probably on the marketing side but this could be part of scoring in terms of risk on your account. Response score is basically the likelihood of the consumer to respond positively to different offers provided by banks and other lending institutions.

As previously indicated, these are just some of the scores they will be looking at. Be sure to be clear with the lenders on these factors to know how you will be ranked and approved.