The Credit Process
Many private loans require a credit check. But what exactly does that mean?
It means lenders look at your financial history to determine if they can approve you for a loan, and if so, what terms they will offer you.
- First Step: Credit Bureaus: All of the lenders and credit card companies you have relationships with send information to three national credit bureaus (Experion, Equifax, and TransUnion).
- Second Step: Credit Reports: The credit bureaus compile credit reports with your account information, balances, and payment histories.
- Third Step: Credit Scores: Credit Reports contain lots of information, so each bureau uses that information fo calculate a credit score that represents how well you have handled credit int he past.
- Fourth Step: Credit Checks: When you apply for a private loan, the lender looks at your credit score, which ranges from 333 (low) to 850 (high), to quickly determine whether they want to lend you money. If so, they also use your score to help determine your interest rate.
- Final Step: Private Loans: The better your credit score, the more likely you are to be approved for a private loan with good terms and conditions such as a low interest rate or reduced fees.