Loan Application and credit history

Now that you've decided which loan you want to obtain, you'll need to give the bank some information to determine if you qualify for the loan you want.  Banks need to establish that you will be responsible for the loan and that you have the ability to repay the bank under the terms of the loan.

A personal loan application will include a number of questions about your job, income, monthly expenses, accounts, house, credit and late payments.  In addition to reviewing your loan application and asking you questions, banks use credit reports to obtain information about your credit history.  Banks will look at how you've used credit in the past. Good credit means you make your loan payments on time and repay the money that you owe.  If you have a good credit record, it will be easier for you to borrow money. If you have credit problems, it will be harder for you to borrow money.

Your credit history is created by data about you that is received from many different sources.  Companies that have granted you credit make regular reports about your accounts to the three main credit reporting agencies; Equifax, Experian (formerly TRW), and TransUnion.  If you are late in making payments, your creditors such as utilities, hospitals, landlords and others may report this information to the agencies.  Your bank may inform these agencies if you overdraw your account or do not make loan payments on time.  You can request a copy of your credit report by contacting any of the three major credit reporting agencies.

Banks evaluate your loan application by reviewing your ability to make payments now and in the future, your credit history or how have you paid your other debts, and your savings or other assets, which could be used for collateral.