Whether you’re applying for a personal loan, student loan or other type of debt, here’s how your credit health can factor in.
There are many different kinds of lenders, loans and borrowing situations. When lenders are evaluating a credit application, they may rely on several different sources of information to help with the lending decision-making process. That said, here are some common ways credit health can help determine your borrowing situation.
Will you get the loan in the first place?
All else equal, the healthier your credit is, the more likely you will be to get approved for a loan, whether it’s a personal loan, student loan, car loan or other type of debt. Though having really healthy credit won’t necessarily guarantee you’ll get a loan you’ve applied for, it’s an important consideration in the process.
What will the loan terms look like?
Your credit health may not only affect whether or not you get a loan you’ve applied for. It may also help shape the loan terms you’re offered. For example, if your credit is healthy enough to get a loan, but still on the riskier side, you may be offered a higher interest rate than you might have been offered with healthier credit.
Will paying off a loan help your credit health?
If you do get a loan and then make regular payments, you'll show good credit habits. Establishing good credit habits like these may lead to healthier credit.
Here’s the bottom line: all else equal, the healthier your credit, the more likely you are to get approved for a loan and receive relatively favorable loan terms. That’s why it’s so important to know where your credit stands and establish healthy credit habits. Whether you’re about to enroll in school or need a personal loan for an emergency expense your savings can’t cover, healthy credit can help you get the loan you need.
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