Instant or Quick Credit Approval and Credit Score

Credit Scoring Enables Fast Credit Approval

The internet is flooded with offers from companies for instant or quick approval on credit cards and loans. Some of this is due to the internet making everything so quick. However, the real reason is because the credit scoring reduces the time needed in the cedit approval process. Credit scoring is changing the way lenders make laons. More lenders shorten their credit approval time by incorporating credit scoring and automated approval systems.

In the past lenders have taken several weeks to process a loan. Now the innovative credit approval system permits lenders and banks to offer credit online or over the phone. Credit scores are used not only in the approval process but also for loan pricing.

Credit scoring and automated underwriting now rule over almost all of the credit card and mortgage loan approval and pricing process. Instead of an individual underwriter carefully reviewing dozens of a borrower's financial documents to arrive at a credit decision, credit applicants are first sorted based on the credit score contained in their credit report.

Time Savings On Credit Evaluation

However, the time savings will bary depending on whether the lender adheres strictly to the credit score cutoff or whether it reevaluates appliations with scores near the cutoff.

One study found that the aproval time for consumer loan applications averaged nine days before the bank started using credit scoring, but three days after scoring had been in use for 18 months. In another study, they found a decrease from three or four weeks' processing time for a small-business loan aplication before using credit scoring to a few hours with credit scoring.

This time savings means cost savings to the bank and benefits the customer as well. Customers need to provide less documents, so applications can be shorter.

Even if a bank does not want to depend solely on credit scoring for aking its credit devisions, scoring can increase efficiency by allowing loan officers to concentrate on the less clear-cut cases.

Instant Approval -- You Need an Excellent or at Least Good Credit Score

The instant approvals are reserved for those with excellent and good credit. A credit card website puts it on their front page— “Please note that in order to receive an instant approval online, you must usually have good to excellent credit. Certain circumstances do occasionally arise in which more time will be needed to determine if you are approved for the card or not.” If you were a credit card company, would you take a blind risk on someone with a low credit score?

In fact, it is the credit score that makes instant approval possible in the first instance. In a matter of seconds, a lender or credit card company can access your credit score and see if you should be granted instant credit approval.

Mortgage Underwriting

As far as mortage home loan is concerned, a borrower with a high credit score can get two benefits. One will be substantially less paperwork, and the other is a slightly better interest rate. For example, a borrower with a credit score above 720 can get 100% financing and not have to provide paystubs, W2s or bank statements to get approved. Also, their rate can be an 1/8% lower than borrowers with lower scores.