July 21, 2024

Can Past Mistakes Prevent You From Getting a Colorado Loan?

3 min read

Manager at work as financial consultant talking to elderly people. Senior man meeting health insurance broker or retirement plan agent for signature on agreement

Getting a loan from the bank in Denver, Colorado, may be more difficult if you have a less-than-perfect criminal record. Most banks used to do a thorough background check before they approved clients for a loan, and if they found a previous conviction, it affected their willingness to extend a loan.

People, especially young people, don’t realize that sometimes the mistakes you make as an adolescent can follow you and make your life difficult as an adult. For instance, in 2015, researchers estimated that 21,000 adolescents used heroin. Some just tried it as a part of teenage experimentation, but an estimated 5,000 of them are still using heroin currently. That means that at least 16,000 adolescents have managed to rehabilitate and lead responsible lives. However, if they were arrested for an offense while under the influence, the record of this felony will follow them into adulthood and can hold them back from leading a productive life because convincing a bank to finance their student loan, a personal loan, or a housing loan may be difficult.

How Do Banks Approve Loans in Colorado?

Before they lend money to anyone, banks need to make sure that they are honest and responsible enough to pay back the loan and not default on payments. They do a series of checks and request documents from the borrower to do that.

If you apply for a loan from the bank in Denver, they will look at how much you want to borrow and run a credit score check. They don’t run a background check as such, but if they pick up gaps or missed payments in your credit score, they will dig deeper to ensure that you are not a person who will run away with their money. Regardless, the credit score and applicant’s income are the two most important factors the bank will consider before granting a loan.

Since September 2018, the Second Chance Law was passed that allows low-level convictions, such as DWI’s, to be sealed and not used against a person applying for a loan. That is good news for anyone who has committed such a felony and already paid their dues to society because the felony will be expunged from their record.

Most of the bank loan applications ask for personal information, proof of address, and proof of income. They will need to know how much money you want to borrow, the reason for the loan, and how you plan on repaying it. Then they will make their risk assessment of the application and either grant or refuse the loan.

Will Past Mistakes Prevent You From Getting a Business Loan in Denver?

Your past transgressions will not affect getting a business loan any more than getting a personal loan. Still, it is not easy for a bank to grant a business loan. According to a Federal Reserve survey, only 40% of business owners in America have applied for a loan. This number is 45% lower than the figure from 2016.

Once again, your credit score will be the deciding factor whether the bank will financially back your business. Even if you missed some payments previously for reasons beyond your control, that would count against you.

To secure a business loan, ensure your credit score is at least 720 points and your business plan is sound and solid. The bank will also consider the health of the business’s cash flow. If your cash flow is limited, the bank will question whether you can, in fact, afford to take out a loan.

So, although making mistakes when you are young can put your future in jeopardy, they may not prevent you from getting a bank loan. With the Second Chance Law, your record can be expunged so that the mistake can be left in the past and not prevent you from getting a loan in the present.

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