My FICO logo $$$$$$$$$$$ 9876 5432 1234 5678 CREDIT CARD KELLY SMITH 11/26 My FICO logo
SCORE
Skip Navigation
  • Why FICO
  • How It Works
  • Pricing
  • Education
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Start Plan
 
  • Why FICO
  • How It Works
  • Pricing
  •  
  • Education
    • Credit Education
    • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Scores Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit and Financial Counseling
    • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
    • Blog
    • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
    • Know Your Rights
    • Identity Theft
    • FAQ
    • Glossary
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • How Can We Help
    • Monitor Credit & Identity
    • Mortgages
    • Credit Cards
    • Auto Loans
  • Credit Education
  • Community
  • Support
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • Credit Education
  • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Score Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit and Financial Counseling
  • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
  • Blog
  • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
  • Know Your Rights
  • Identity Theft
  • FAQ
  • Glossary

Estimate your FICO® Score range

Answer 10 easy questions to get a free estimate of your FICO® Score range

Estimate for Free

Get your FICO® Score for free

90% of top lenders use FICO® Scores

Get Access Now
No credit card required
View all Financing & Loans articles

5 Things to Know Before Applying for a Loan

August 14, 2018, by Rob Kaufman

Knowledge is power and the more you know before applying for a loan, the better. Having important information in your back pocket can help save you a lot of time, money and inconvenience down the road.

The items that follow are what we consider the top 5 things that are most important to know before filling out that loan application. There are others, of course, but these 5 lead our list. You can also use much of the information below when applying for credit in general, for example: a credit card or retail card.

Whatever type of credit you're looking for, keep in mind it's always best to:

1. Know Your FICO® Score

Used by 90% of top lenders to assess a consumer's creditworthiness, your FICO® Score can make or break your ability to get a loan. Creditors want to feel secure that you'll be able to pay them back. Your FICO® Score provides them with insight in a single glance.

If your FICO® Score is low, you might want to consider holding off on that loan or line of credit until you've had a chance to raise your score. Why? Typically, the lower your FICO® Score, the higher your interest rates and overall borrowing costs will be.

In addition, your score may lower with every credit inquiry. So, if your initial application is denied and you apply to other creditors who must also inquire into your credit, these inquiries will appear on your credit reports and continue to lower your score.

2. Know Your Credit Report Information

Check your credit reports, preferably from all three credit reporting agencies, to make sure all information is correct. There are changes made to credit reports every day so errors may occur. What if the home address on the reports don't match the forms of ID you bring to the lender? Or, what happens if one of the reports shows a loan you never opened?

Checking your credit reports is important to do at least once a year, not just when applying for a loan. It helps you catch problems due to an error and/or identity theft sooner rather than later... something that can make life that much easier.

3. Know Your Borrowing Costs

Interest rates, closing costs, penalties... the list of potential costs to borrow money can get very long. Knowing and understanding these costs before applying for a loan can help you make the best choice among lenders.

For instance, if you know the prevailing interest rate (also known as the "current market rate"), you can compare the APR (Annual Percentage Rate) of different lenders in order to get the best possible deal. Since the APR shows you the total amount of interest and other costs as a yearly percentage, you can shop around with more confidence.

Be sure to know if the loan is a fixed or adjustable rate loan since that will affect the amount of money you'll be paying in the long term.

4. Know How Much You Can Afford

Although this might sound like it should go without saying, we'll say it anyway. Before applying for any type of loan, know how much of a monthly payment you can afford.

What's your current monthly budget? Is there a maximum monthly payment you can make without going over that budget? Once you've crunched the numbers and know how much is available to repay the loan, get a loan agreement that allows you to pay the money back as fast as possible without going over your budget.

5. Know What Documents You Need

You'd be surprised how many loans are rejected because the applicant didn't have the proper paperwork or all the required documentation. To get the loan arrangement (and interest rate) you deserve, the lender needs to know and understand your entire financial picture.

Before meeting with a potential lender, find out all the documentation you'll need.  Some of these might seem obvious, but here a just a few:

  • Identification (typically a state ID and/or your social security card)

  • Proof of income

  • Employer contact information

  • Contact information (telephone and address)

  • Most recent tax returns (some lenders may ask for several years' worth of tax returns)

  • Proof of assets that relate to your ability to pay, such as a 401(k) or other investment assets

  • A completed application

  • Deeds

  • Information regarding all of your bank and credit accounts...

...and anything else the lender requires to make an appropriate decision regarding your loan.


At the myFICO forum, members talk about their loan experiences - the good, the bad and the ugly. See them for yourself before you apply for your loan.

**

Image of Rob Kaufman, writer with financial investment and credit marketing experience.

Rob Kaufman

Rob is a writer... of blogs, books and business. His financial investment experience combined with a long background in marketing credit protection services provides a source of information that helps fill the gaps on one's journey toward financial well-being. His goal is simple: The more people he can help, the better.

Estimate your FICO® Score range

Answer 10 easy questions to get a free estimate of your FICO® Score range

Estimate for Free

Get your FICO® Score for free

90% of top lenders use FICO® Scores

Get Access Now
No credit card required

Page footer

Products

  • Home
  • Why FICO
  • How It Works
  • Pricing

Learn

  • Education
  • Community
  • Support
  • Blog

Company

  • About Us
  • Terms of Use
  • Cookie Preferences
  • Privacy Policy
  • Affiliate Program
  • Accessibility

Get Our App

  • Download iOS app on the App Store
  • fil_get
    Get Android app on the Google Play Store

Follow Us

  • Twitter
  • Facebook
  • Instagram

Credit Education

  • Credit scores
  • What is a FICO Score?
  • FICO Score versions
  • How scores are calculated
  • Payment history
  • Amount of debt
  • Length of credit history
  • Credit mix
  • New credit
  • Credit reports
  • What's in your report
  • Bureaus
  • Inquiries
  • Errors on your report?
  • Calculators
  • Know your rights
  • Identity theft
  • FAQ
  • Glossary

Copyright ©2001- Fair Isaac Corporation. All rights reserved.

IMPORTANT INFORMATION:

All FICO® Score products made available on myFICO.com include a FICO® Score 8, and may include additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.