- Emma Anderson
- September 10, 2018
Since decades, the credit scores are enjoying their supremacy over any other factor in the lending industry. To judge the financial or repay capacity of the loan applicant, they have always been considered as the prime factor. Whether it is about a short-term loan of only a few months or a long term funding solution for several years, lenders firstly rush to check your credit scores. A slight flaw on that part gets you rejection and this leaves a footprint on your financial records. All thanks to credit check that proves you a ‘risky bet’ in the eyes of the other lenders too.
This stringent attitude towards credit score status is creating problems in the financial lives of bad credit people. This has given birth to the concept of no credit check loans in which the credit score is not checked to know the eligibility of the applicant. However, the question is, if there is no credit check then how do the lenders take the decision to approve a loan? What makes them believe on the financial capacity of the applicant?
The answer to these questions resides in the new flourishing culture of online lending where funds are given with an unusual approach. The trend is to do the AFFORDABILITY CHECK and not the credit check. Poor credit performance can be the result of past financial mistakes but in present if you have stable finances then repayment capacity can be considered good. This is what matters for a lender. Several factors help to know that the fund seeker has that repay capacity. A lender scrutinises them all and once satisfied, the approval is given.
What Exactly Affordability Check Is All About?
The affordability check is basically the study of your financial circumstances that includes many aspects. The loan company take some details from the applicant and decides if approval should be given on the concerned application or not.
FACTORS THAT PROVE THE AFFORDABILITY
Current Financial Status
It is very important to see how the applicant is performing in the current finances. Yes, the credit score status is important, but what is the use of a good credit history, if the applicant does not have the capacity to repay the loan in the present. However, a vice versa situation is comparatively acceptable, in which, the applicant may have some flaws and default in the past payment records, but now have gained a good financial capacity.
Ratio of Income and Expenses
Your expenses should not dominate your income; if they do so, then how will you manage to bear another expense in the name of loan instalment. In that case, even if your credit scores are good, the lender may hesitate to consider your loan request. This means, credit scores are not everything, your financial circumstances are always more important than the mere credit score performance.
For Unemployed – Good Recent Finances, Offer Letter of New Job Is the Stimulator
Unemployment is an uninvited guest that may knock to your door without any intimation. When it happens, then the conditions of mounting debts come to you unhesitatingly and transform the good into bad credit performance. What to do now? Will you sit back to wait for a new job and let your credit scores slip into worst credit situation? Oh, certainly not! There are several lenders that are ready to take risk to lend you. However, they need some reasons to take you as creditworthy.
Recent financial status that includes your income status, transactions, and specially salary proof of previous companies can make them approve your loan. More promising is, if you have been recruited for the new job and have an offer letter of the company, then it is not wrong to keep hopes on approval of bad credit loans.
The above factors are undoubtedly decisive and affect the decision of the lender irrespective of the credit score status. The time is gone when credit scores were everything, now the new age lending is inspiring new changes in the finance industry and fortunately that change is GOOD.