Having bad (or even fair) credit can make it difficult to get a loan. Your potential lenders look at your credit score, which is impacted by income, primary tradelines and more, to determine whether or not you qualify for their loans. But often, the exact things that make you need a loan are the things that disqualify you from getting one. It’s frustrating, but you can work around it.
The Cycle of Loan Rejection
If you need to get a loan, then it can feel like you’re stuck in a bad cycle. Often, you seek the loan because you don’t have enough money. This may be due to income loss, emergencies, excessive bills, and/or not having enough access to credit.
Therefore, you apply for a loan. However, these exact things that make you need the loan make you a less-than-great borrower in the eyes of the lender. They reject the loan application for the same reasons you need the loan. It’s frustrating. So, what can you do?
How Your Credit Score Impacts Loan Qualifications
Your credit score is one of the main things that determines whether or not you will qualify for a loan. Of course, you already know that you get a numerical score. This score correlates to a rating of “fair” or “poor” or “very good” and so forth. The better your score, the more likely that you are to get a loan.
Factors that Impact Credit Score
It’s important to think about why your credit score is impacting your loans. That’s because if you know the reason, then you might be able to improve the credit score. If you can do that, then you can probably avoid loan rejection.
Here are three of the the most common factors that impact credit scores:
- Primary tradelines and authorized user tradelines, which are simply each account listed on your credit report, including age of each account
- Payment history, meaning whether you’ve paid on time or late or have delinquent accounts
- Total amount of debt compared to your available credit
There are some other factors but these are three that are most important if you want to improve your credit score to avoid loan rejection.
Understanding Tradelines to Boost Your Score
If you understand the tradelines on your credit report then you can figure out how to boost your credit score.
There are two types of tradelines:
- Primary tradelines, in which you were issued the account directly (credit cards, mortgages, etc. that are in your name)
- Authorized user tradelines, in which someone else is the primary tradeline holder and you’ve been added to improve your own credit score.
You can improve your credit score by attending to both of these.
How to Improve Your Primary Tradelines
The most important tradelines on your credit report are the ones that you have had the longest. Take a look at each of those and see if you can improve them by:
- Lowering the amount of debt on each of them
- Requesting a balance increase (only if you’re likely to qualify)
- Making sure to always pay those first, on time
How to Use Authorized Tradelines to Improve Your Credit Score
Of course, if you’re seeking a loan, then you might not be in a position to improve your primary tradelines right now. This is where authorized tradelines, also sometimes called seasoned tradelines, can come in.
Basically, the way it works, is that someone with strong primary tradelines adds you as an authorized user. Within a very short period of time, it shows up on your credit report. You gain the benefit of all of that credit history. This can significantly improve your credit score.
Anyone you know who has good credit can add you as an authorized user on their primary tradelines. Alternatively, you can use existing companies that work with customers to sell authorized tradelines. Either way, your credit improves. This allows you to avoid loan rejection and get your finances back under control.