How To Prepare For A Loan Application

When you're getting ready to apply for a loan, it's important that your credit is in the best shape possible.

1. Order a copy of your credit report at least six months before putting in the application. Review your report to make sure there's no inaccurate information included, e.g. accounts that don't belong to you. Get current on any delinquent accounts and pay down balances that are close to the credit limit.
2. Don't put in any additional loan or credit card applications before you put in your loan application. If lender sees that you've applied for new credit, they'll become fearful that you're taking on too much debt. This makes you look like a risky borrower and can lead to your loan application being denied.
3. Evaluate your debt-to-income (DTI) ratio. The lender is going to do it, you should too. Knowing your DTI ratio will help you figure out the likelihood of getting approved for the loan. If your ratio is high, above 37%, you'll find it hard to get approved for a loan. Bring down a high DTI ratio before making applications for new loans and even credit cards.

Much like studying for a test, putting in a loan application takes preparation. Taking the time to do this preparation will improve your chances of getting approved.