When most people think about getting approved for unsecured loans, they think it all comes down to one number: their credit score. If a lender runs your score and sees something above 700, you’re golden. If it’s under 650, get ready for a denial.

However, what actually goes on behind the scenes is far more complicated, and for lenders and banks, it’s a broad picture that determines whether you’re a worthy candidate. In other words, yes, credit scores factor into unsecured loan approval, but it’s one piece of the puzzle used to assess whether you’re a risk worth taking.

Undergoing an unsecured loan process is tiered and assessed in ways that are never presented to the borrower. Essentially, the lender is gambling on whether you’re going to pay them back. For situations where no house, car or asset is going to be recalled if you fail to pay your bills, banks assess much more of an individual’s financial history and operation than most borrowers realize.

The Myth of Credit Scores vs. What Else Borrowers Have

Credit scores are crucial and for this reason, highly investigated. Usually, scores over 700 are deemed acceptable; under 650 raises red flags. But often lenders don’t merely stop at the score, they read the story behind it.

Take two borrowers with the same 680 credit score. One of them has a single medical bill that went into collections three years ago but aside from that has a flawless payment history over the last fifteen years on multiple lines of credit. The other has maxed out credit cards, missed payments galore over the past year, and hasn’t really ever had a consistent payment plan for any debt.

While both are still risky (albeit with some potential caveats), you can see how they stem from two separate situations with the same score. Lenders take into account the report with all of this information. How long have you had accounts? How many accounts do you have? What kinds of credit have you explored? Have you recently stopped paying your bills or paid them late? One late payment five years ago? Not great but not terrible. Three late payments in the past six months? We need to talk.

Income Verification and Employment Status

People are surprised at this part of the application. Does your income meet the minimum required expectation for paying back this unsecured loan? Even if the bank calculates that this is the case, they still need verification.

According to traditional employment type standards, lenders will ask for W-2 forms, pay stubs that showcase consistent income, and sometimes even a direct phone call to human resources from the lender for confirmation (borrowing self-employed or other arrangements carry additional scrutiny as most institutions require two years of tax returns to prove stability with additional inquiry via bank statements and further documentation).

But it’s also not just about how much money you make; it’s about how consistently you’ve made it and whether they’re confident you’ll continue making it throughout the duration of your requested loan. For example, $50,000 for five consistent years at the same job looks better than $80,000 within three different jobs over the past two years.

Debt-to-Income Ratio

Perhaps even more important than anyone thinks. Your debt-to-income ratio (DTI) is how much money you owe per month versus how much money you’re earning per month before taxes. Most lenders find anyone with a DTI over 43% risky; some don’t like it above 40%.

Basically this means that if you earn $5,000 per month and currently owe $1,500 in monthly car loans, student loans and other debt obligations already for which you pay $300 per month to XYZ credit card company and are looking for another $500 unsecured loan payment, that’s putting you at a healthy $400 level of risk as you’re still at 40%. This needs to also be considered without also considering minimum payments on credit cards or any other debts.

Divorce settlements (child support or alimony) also count, even if you’re only making minimum payments elsewhere if those charges exist, they’re still accounted for.

Employment History

Lenders want to ensure that your income is secure both before and during their lending process. If your only source of income is through this proposal and you decide in two months that you’re quitting your job to go freelance on social media, that’s not great, but if you’ve been doing the same thing for ten years and want a change during that time with savings accumulated to ensure there’s going to be effort in good faith lending efforts based on what lenders pay it makes them more comfortable. Banks don’t want unstable people; they want people who are predictable, reliable and will repay.

This does not mean that a new job means instant denial but it might mean more questions along the line about your experiences, why you left your last position if it was stable employment and how you’re sure you’re going to earn as much as predicted if it’s entirely in a new field.

For those looking at opportunities for unsecured loans without collateralized assets to back them up, unsecured loans have become more likely as banks have leaned in to new lending protocols which help assess lending risks through other factors relative to loans rather than collateral.

The Purpose of the Loan Makes a Difference

Not all proposals for loans are treated equally. A person looking for debt consolidation has a better chance than someone looking to renovate a home. Someone looking for a personal loan so they can go on vacation has a better chance compared to someone looking to take out a personal loan for debt consolidation efforts bringing them down at the moment but they may say will help them in the future.

This isn’t always something lenders ask right away but when they sense there’s something questionable, they’ll get what they’re looking for. Loans for home improvement projects or medical expenses seem favorable whereas ones for personal use don’t seem like good financial planning.

Your Relationship with the Bank Counts

While this isn’t often talked about enough, if you’ve had a bank account or checking account with an institution for five years without overdrafts and reputable savings investment with little taken out by the bank in fees, it’s demonstrated that you’re responsible with your own money. Banks have information about your spending habits outside what’s included in reports, your own history shows employment stability which supports lending application.

If an application is rushed or incomplete, even if it hasn’t been trained as such, it inspires uncertainty. A clean application with all necessary documents submitted before asked shows tenacity and organization; lending expectations should not be explored without legitimate reasoning.

Automatic Denials

Certain situations automatically make things more complicated; recent bankruptcies make everything questionable while too many recent inquiries show desperation or poor maneuvering over the last few months for cash if people are crashing and burning.

Problems connecting employment history, i.e., if someone has nine months missing from their latest employment history with no explanation, lend credibility concerns.

Banks also connect situations where incomes don’t match, was someone lying about how much they made? Per their 1099? Does their employment not match per the person’s report versus what HR submitted?

Making Yourself a Favorable Candidate

The more someone knows what gets assessed beyond superficial expectations, the more they can fill in their own holes before approaching on the financial end. Maintain consistent history where income remains stable as someone should be able to prove they have manageable DTI requirements in addition to a necessary reason for requesting funds immediately thereafter.

Ultimately no amount of secrecy should play into what inspires potential loan applicants to believe it’s out of their control. Banks want their money back, they wouldn’t risk finding out information that could have led them down another path if things were crystal clear from someone else’s perspective beforehand.

In simple terms, getting approved for loans isn’t based on arbitrary statistics above all others, but set guidelines determined risk without potential collateral standing behind them. While credit scores open up conversations, they don’t guarantee access without supportive evidence in play. When prospective borrowers understand what lenders are really seeking, before they expose credit scores, they can build themselves up in ways that create equity so potential lending isn’t in jeopardy due to assumptions or precarious details that might be seen as suspicious instead of real life situations.