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Blogs > Can Your Location Be the Reason for Rejection of Your Loan?
It is the bonus season and you have got a recent hike on your salary. Time to remember your New Year Resolution – no more spending your money on malls and theatre. Instead this year you will be working towards achieving your long-term financial goals. This time you are determined to fulfil all your dreams. Especially the one you were planning since your childhood, that is, to buy your own dream home in your favourite location which is well connected by public transport, hospitals, and markets.
You have decided to take a home loan to make the long-awaited purchase. Next, you have checked all the necessary documents before you apply for the loan. With your good credit score and impeccable credit history, you are sure that you will get a home loan easily. But have you considered the nightmare situation where your loan application gets rejected? What makes it worse is that you don’t know why? Do lenders only check your credit history for making a lending decision?
Gone are those days when financial institutions only looked at your credit score to assess your creditworthiness. We all know how the internet has changed our daily life and similarly the lending industry. Along with your credit score, these companies are now analyzing a huge number of data points. These are then incorporated in a complex algorithm to determine the behavioural pattern of the borrower when assessing his/her loan application.
That said, not all lenders use big data to assess the creditworthiness of the applicants. However, with rapid technological advancement and sophistication of data collection points, the face of the lending industry may be altered with time. Thus, it becomes important for us to be aware of such techniques which certain lenders are already following.
Here are some of the other ways by which some lenders assess your creditworthiness:
When lenders receive your loan application, they look at your work experience, how reputed is the company you work at. Moreover, lenders also look at the locality you live in and your accommodation setting (whether you live in a rented or self-owned home).
Working in a reputed company is a positive factor in your credit profile. It would mean that you are a financially stable individual who can pay his bills on time. However, a high ratio of credit defaulters in your neighbourhood or at your workplace could get your loan application rejected. Not only that, every lender keeps a record of those who default on their loan. So, if you happen to reside in the place which falls under this category, your loan application is more likely to get denied by your lenders.
Your social media friends may be a bigger deal than you think. Lenders may look at your social media friends to analyse your creditworthiness. Surprising, isn’t it?
If you are friends with an individual on a social network website who has defaulted on his loan in the past, the chances of your loan application getting rejected would be higher. It would be even higher especially if you interact with that individual on a daily basis. The lenders also analyze with whom you are interacting the most. Thus your social circle plays a major role in determining your creditworthiness.
Your lenders may ask you for your permission to access your online payment accounts. This is done to analyze your online payment accounts to know your payment strategies. They will check your regularity in paying bills, your minimum repayment amount, and how well you take your responsibilities in terms of finance.
Also, you should never forget about your credit report as in this case your credit report plays an important role in determining your creditworthiness. A missed payment, overutilization of your credit cards, continuous rejection of your loan application etc. – all these get listed on your report. Therefore, it is advisable to keep a tab of your payment accounts and their payment history to get approval on your application.
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