As times get tough and financial belts are tightened it is becoming increasingly important to ensure that your financial affairs are in order before attempting to approach a lender.

A clean credit history is still the most important determining factor that lenders consider when looking to grant a loan, or credit of any kind. Other factors that are considered include the loan-to-value ratio as well as the borrower’s assessed ability to service the loan in its entirety.

A good credit rating can potentially give the borrower access to a range of benefits, from the option of a wider range of loan products, to lower interest rates and even quicker approval times. A variety of credit arrangements from a borrower’s financial history, and the way in which these arrangements have been managed, are considered when a lender is assessing a borrower for credit. Everything from credit cards, to mobile phone bills and retail-based ‘interest-free packages’, are closely reviewed and good management counts for a lot.

It is a good idea to access and review your credit history prior to approaching lenders. This gives you the opportunity to identify and ‘clean up’ any problem areas that may cause concern for your prospective lender. This is preferable to waiting for the lender to deny your application and then finding out that there were things you could have done to prevent it.

Some handy tips that can help you have a more successful application process include:

• Review your credit reference. You can do this using a range of online credit check facilities to see details such as lender enquiries, credit card defaults and bankruptcies.
• Look at reducing the number of credit cards you have, as well as the limits on individual cards. Borrowers are assessed not just on the amount that they owe, but also on the amount of credit that they have access to. Reducing the amount of credit you have access to can also potentially increase your eligibility for a larger loan amount.
• Pay your bills on time. Even small things such as late or unpaid telephone bills, even if the account is no longer current, can impact on your loan approval.
• Be upfront with your lender. It is better to explain any past or current credit problems to your lender initially yourself, rather than have then discover it and confront you about it later.
• Do not be hasty and do not submit multiple applications. It is important to do your initial research and be well prepared. Avoid making multiple applications for credit as they are all recorded on your credit history, and too many enquiries will not reflect favourably with prospective lenders.