The requirements for line of credit loan approval vary from the banks or financial institutions offering the loans. Unlike a traditional credit card where you can use it when and how you like, a line of credit is a specific amount of financing you can access as the need arises. When you qualify for a line of credit, you repay the loan over a specified period, or you can repay the loan in one payment. If you choose a line of credit as a loan, you will immediately pay interest on the loan immediately upon borrowing the money.
Line of Credit Approval Requirements
Many lenders ask that you meet certain requirements before approving you for a line of credit. Some banks stick to the basics and only ask that you have gainful employment where you receive regular paychecks with an active checking account. Some lenders do not require credit checks and only ask if you are a citizen of the United States and at least 18 years of age.
However, some lenders demand that you meet strict requirements before you qualify for a line of credit. Some banks set certain credit score limits before they even consider you for a loan. The credit score minimums are sometimes set at 680 with a few lenders requiring a minimum credit score of 720. Traditional banks also require you meet certain debt-to-income ratios and only allow you to borrow a minimum amount of money based on your credit score.
Alternative lending is an attractive way to sidestep all the headaches associated with the approval requirements of traditional lenders. Although some lenders charge slightly higher interest rates, the higher rates are worth it when you gain immediate access to your line of credit with minimal approval requirements. Many alternative lenders deposit the funds from your loan on the next business day, which is a far cry from waiting for weeks on an approval from a bank.
The best way to ensure you qualify for a line of credit is to check your credit score and try to rebuild your credit if your score is low. Higher credit scores often guarantee you will qualify for loans and lines of credit with low-interest rates and favorable terms. The three major credit reporting agencies, TransUnion, Experian and Equifax recommend that you try and keep your credit score above 680. Most banks and lenders consider credit scores above 720 as good-to-excellent credit.