The demand for eco-friendly homes is booming. In 2019, 38.5% of consumers said they had bought green homes or renovations.

Are you interested in doing an ecological renovation of your home? This can be a great way to demonstrate your commitment to sustainability.

There are many good reasons to invest in green improvements. USA Today has a list of six energy efficient upgrades that can protect the environment and reduce your energy bill by $ 1,000 or more per year.

While there are many great reasons to invest in green renovations, they aren’t free. You may need to take out a loan. The good news is, you’re more likely to qualify for a green home improvement loan if you take the right steps.

Maximize your chances of obtaining a loan for an eco-friendly home renovation

If you’re looking to raise money for a one-time purchase like a new car, bathroom update, or kitchen, a loan can be a great choice if you’re confident that you can cope with repayments comfortably. Loans may be needed when trying to install solar panels or make other sustainable improvements to your home. But knowing if you’ll qualify for a loan can be confusing. And if you apply for it and get rejected, it will show up on your credit report, which may cause other lenders to say no.

The best way to avoid this is to understand the criteria that lenders consider when evaluating loan applications for green renovations: your credit score.

What is credit rating?

A person’s credit rating tells lenders how risky it is to lend to them. It takes into account past credit behaviors to get a sense of the likelihood that a person will repay their loan without missing payments or defaulting altogether.

If you have a bad credit rating, lenders will increase the amount it costs you to borrow money because they see you at greater risk of defaulting. On the other hand, a good credit score gives you access to cheaper debt because you’ve been shown you can pay it off.

As such, if you want a loan, it’s important to get a positive credit score before you apply – it will cost you less if you do.

Credit scores are displayed as a number. They are created using your credit report and are used to inform credit scores, which vary depending on the credit reference agency.

What credit report information is used to establish a credit score?

Credit scores are based on credit scoring models. There are many, although the most common are the FICO score, used by 90% of lenders, and VantageScore, which is used by Experian, Equifax and TransUnion, the three largest credit reference agencies.

Typically, credit reference agencies use the following information to assess your credit score, which is typically kept for five to six years:

• Electoral list – All the addresses where you registered to vote and when you registered.
• Linked addresses – The addresses where you lived.
• Public documents – Court judgments, bankruptcies, individual voluntary agreements (IVAs), debt relief orders, administrative orders – and in Scotland – orders in council, receivership orders, DAS debt payment programs and trust deeds.
• Home repossessions – If your house has already been repossessed.
• Financial associations – Who you are financially related to, such as those with whom you have joint accounts or with whom you pay a joint loan.
• Previous credit searches – Organizations that have looked up your credit file information in the past 12 months.
• Account Info – Information about any bank or credit accounts you have ever opened and how you have handled them (for example, if you have ever made late payments).
• Fraud Information – If you have ever been a victim of fraud, your credit score will have a mark against it, so you are not treated unfairly by lenders because of the fraud.

To view your credit report information, you can request it from any credit reference agency. While many advertise paid services, they are obligated to provide them to you for free upon request.

It is always a good idea to consult your credit scores and the reports of a number of agencies before applying for a loan, so that you have a complete idea of ​​what offers will be offered to you and the likelihood of your request. be rejected.

What to do if you are refused a loan for an ecological renovation of your home?

Being turned down for a loan can be frustrating when trying to finance a sustainable home improvement, but it’s important to note two key things.

First, many lenders will continue to lend to those with bad credit. If you are looking to purchase a vehicle, for example, bad credit auto financing is available from some lenders, although these loans typically do not cover electric cars, business vehicles, sports cars, or vehicles. more than ten years. The same types of restrictions are likely for other purchases, such as business or home loans.

Second, there are a lot of things you can do to improve your credit score. Updating the voters list when you move out, getting rid of outstanding debts, applying for small loans, and paying them off systematically, like a credit card, are all great ways to replenish your score to improve your eligibility.

Credit scores can seem complex, but if you are armed with the above information, you can start dramatically improving your finances immediately.