Not many have a clear understanding of the process which is why a significant percentage of people would say no. However, we all understand what taking out a loan means and how it works. You apply for a loan, and then your application undergoes a screening process which you can call the credit underwriting process. This is essential because when you apply for a loan the lender has to be sure that the amount you are borrowing from the lender, you would be able to repay that amount with the interest rate. To be sure he needs documents, and he also gets your credit score and on the basis of all these data, the lender assesses your creditworthiness.
What factors play a key role in the loan underwriting process?
Now you might wonder why you need to learn about the loan underwriting process, the reason is that if you have the awareness then you can take preventive measures when there is still time. Unless you pay attention to your credit score, you run the risk of getting rejected if the score gets really low. Now let us pay attention to the factors that are taken into account during the loan underwriting process.
- Your credit score actually plays a significant role in the underwriting process. Now the number could be anywhere between 300–900 and it is needless to point out that the higher the score is the better are your chances of cracking that credit risk assessment procedure and get approved for the loan. However, your score could be improved by taking some simple steps.
- Another factor that would be judged during the credit underwriting process in banks is the income., What your income is and your creditworthiness would get judged by that as well. If your income level is not satisfactory according to the lenders, your application might get rejected as well, because the lenders might not want to approve the loan.
- How many outstanding debts you have would again dictate your chances of getting that loan. If you have not cleared your previous debts then that might go against you. So, now you can settle those debts and make some progress before you send that application.
There are other factors beyond the ones mentioned here which are taken into account, so stay updated and take the required measures to ensure you are on the right path.
