Applying for loans is not as easy as it may seem at first sight. There are many factors that can play against you and might discourage the lender from approving your application. Among those, the most important ones are your credit score and the debt-to-income ratio (DTI).

Credit Score: The credit score can be measured on a scale of 300-850 points. If you have any unpaid bill, late payment or default on your account, then your credit score will go down and it will be more difficult for you to get approved for loans in the future.

Before you start applying for personal loans, it’s important to know your credit score to make sure you can qualify. Most personal loan lenders are looking for applicants to have a good credit score, particularly online banks. However, if you have an existing relationship with a bank, you may get approved for a favorable deal if you have a good history of paying bills on time and honoring the terms of your past loans and accounts.

When you have a good credit score, it means that you have a history of good financial management and maintaining a low debt to income ratio. This makes you a very attractive borrower to lenders.

Sometimes, credit unions will offer lower interest rates on personal loans and work with borrowers who have fair or average credit scores. But you often need to become a member and sometimes you need to open a savings account before you can qualify for a loan.