Lender rates and approvals are not always what we expect.

We spend months, even years, focusing on improving our credit scores. But when the time comes to take out an additional line of credit for a personal loan, the offers (or lack thereof) staring back at us might raise a question: “Why didn’t I qualify for a better rate?”

What many consumers don’t realize is that the rate any bank is willing to provide is subject to multiple factors of “creditworthiness”, and an individual’s credit score only plays a part in that.

Since SweetPay has multiple lenders integrated into its platform, we regularly see lenders declining and approving opposite of each other. We also regularly see an individual with a higher FICO than another be declined while the individual with the lower FICO is approved.

On the surface, it seems like there is no rhyme or reason to it. But, the “secret sauce” of decisioning factors varies from lender to lender. They put together their “scorecard” based on risk and reward parameters. 

The parameters used are many. Most people think credit decisions are based solely on FICO. While FICO is an important factor, many other variables go into a lender’s decision, such as: 

  • Debt-to-income (DTI) ratio
  • Home ownership and equity
  • Financial stability – time-at-job and time-at-residence
  • Demographic – age and profession

But that’s not all. 

Whether you are applying for a loan online or in-store can also make a difference in whether you’ll be approved and for what rate. An online personal loan will typically go through additional scrutiny and tighter credit policy — a precautionary measure to prevent fraud and ensure repayment.

In addition, some businesses are willing to provide consumers with special rates, such as a 0% interest promotion. These offers are not always based on your creditworthiness, so much as the businesses willingness to cover the cost of your offer. 

So, as you move forward to improve your credit, think holistically about your financial picture rather than just on your FICO score. It will make a difference on your future personal loan offers.