Is it really true that a good credit score makes a difference when it comes to loan approval? In short – yes, it does. While there are a number of factors banks and lenders will take into consideration before approving or rejecting any loan application, a good credit score can make a significant difference in increasing your chances of success when you’re applying for a loan.

Recent CTOS study reveals that consumers with high credit scores are five times more likely to secure loan approvals

According to the CTOS Score Band vs Loan Approval Rates Study 2024, those with high CTOS Scores had 74% approval rates for auto loans and 61% approval rates of mortgages. In contrast, those with low CTOS Scores had a mere 9% chance of securing an auto loan, and a 22% approval rate for mortgages. The study, which utilised a sample of over 250,000 applications for financing within one month of the MyCTOS Score report being checked, also highlights the disparity in loan approval rates between the various CTOS score categories. The largest disparity between those with the highest and lowest credit scores comes from credit card applications. Consumers with a poor CTOS Score only had a 10% chance of being approved for a credit card, while those with an excellent score had an approval rating of 76%.

How to improve your CTOS Score

If your CTOS Score isn’t as good as you want it to be, don’t worry. You can always take steps to improve your credit score, no matter how low it is. Your score may not improve immediately, but with good planning and responsible credit behaviour, your score will gradually improve.

Here are some quick tips on how you can improve your CTOS score:

Pay your bills on time

Try to pay your bills on time every month. If using a credit card, try to make the minimum payment for each month if you cannot afford to pay the entire sum. Missing your payments, even for just a month or two, will show up in your credit report. It’s okay if you’ve missed payments in the past – just get current and stay current.

Keep amounts owed low

Keep your debt balances low, and instil the habit of paying your debts off regularly so that the amounts owed get less, steadily. Maintaining discipline in your payment behaviour will ensure that your debts decrease over time. Also, when applying for loans, don’t ask for more than you really need. Remember at the end of the day, any amount you request for a loan will incur interest and still needs to be paid back.

Re-establish your credit history if you’ve had problems

It’s crucial to fix your credit history, especially if you’ve had issues with it. Ignoring or pushing the problem away will just cause more issues in the long run. Meanwhile, don’t take drastic measures, such as quickly closing numerous unused credit cards, opening many new ones or opening many new accounts. If you’re facing difficulties managing your credit health, see a good credit counsellor or financial services advisor for guidance and to know what first steps you should take.