What Lenders Look at on Your Credit Report

What do lenders consider when they look at your credit report ? It ‘s a elementary question with a complicate answer, as there are no universal standards by which every lender judges potential borrowers .

Of course, there are some items that will decrease your odds of approval just about everywhere. Looking at what makes up your FICO score ( which most people think of as “ my accredit rate “ ) is a commodity target to start. FICO scores range between 300 and 850, with anything 650 or above considered a good citation score. If your score is below 620, you will credibly find it difficult to borrow money at friendly interest rates.

Key Takeaways

  • Payment history accounts for 35% of a borrower’s FICO score and is the most important factor for lenders.  
  • Large amounts of outstanding debt are another significant concern to lenders.
  • A long track record of responsible credit use is good for your credit rating.
  • Lenders want to see that their clients have experience using multiple sources of credit—from credit cards to car loans—in reliable ways.


What Lenders Look At On Your Credit Report

payment history

More than anything else, lenders want to get paid. accordingly, a potential borrower ’ s track record of making on-time payments is of particular importance. In fact, in calculating a likely borrower ’ south FICO score, payment history is the most significant factor. It accounts for 35 % of the score. cipher is excited about loaning money to person who has demonstrated a less-than-stellar commitment to repaying their debts .

late payments, missed payments, mortgage default, and bankruptcy are all red flags to lenders, as is having an history referred to a solicitation representation for miss of payment. While a few blemishes on your requital history may not stop lenders from giving you money, you are likely to get approved for a smaller sum of money than you might have otherwise qualified for, and you are probable to be charged a higher rate of pastime .

Outstanding debt

big amounts of outstanding debt are another significant concern to lenders. It ’ s a bit of a paradox, but the less debt you have, the greater your chances of getting credit. The rationale here is exchangeable to that involving requital history. If you have a big amount of existing debt, the odds that you will be able to pay it back decrease .

large amounts vary from person to individual and are defined based on metrics such as the individual ‘s sum annual income and the debt use pace, which is the sum of debt divided by the limit amount of debt allowed in each account. Outstanding debt accounts for 30 % of your FICO score calculation .

Length of Credit History

A long cut record of responsible citation function is good for your accredit rating. The frequency with which you use your cards besides plays a character. The length of your credit history makes up 15 % of your FICO score.

New Accounts

Having an established credit history is commodity for your credit military rank. Opening a crowd of raw citation cards in a short amount of clock is not. When you on the spur of the moment open multiple recognition cards, potential lenders can ’ thymine aid but wonder why you need so much credit. They will besides have questions about your ability to repay the debt should you on the spur of the moment choose to max out all those cards. New credit accounts for 10 % of your FICO score.

If you need a thoroughly credit score, take a die on opening a new credit card account just to get that spare travel mug or umbrella, and even that tempting 10 % deduction on your leverage at the time of opening a storehouse bill. Cashiers are paid to open new memory credit cards and it is character of their duty to convince you to open shop citation wag accounts. It is your duty to resist it and decline respectfully to preserve your credit rate at a decent horizontal surface .

alternatively, if you already have opened multiple citation cards and want to improve your citation mark, consider reaching out to one of the best credit repair agencies for aid .

Signing up for several new credit cards within a inadequate menstruation of fourth dimension may hurt your credit score.

Types of Credit Used

From credit cards to cable car loans and mortgages, there are a variety show of ways consumers use credit. From a lender ’ s position, kind is good. Lenders want to see that their clients have know using multiple sources of credit in authentic ways. FICO score calculations give a 10 % weight unit to types of credit used.

Beyond FICO : What Else Lenders Consider

Your FICO grade and its components provide a dear fix of general guidelines for the type of items lenders consider when reviewing applications for credit rating, but there ’ mho more to the subject than fair your score. Creditors may have their own proprietary score methodologies that use similar, but not identical, factors when determining an applicant ’ second eligibility for credit .

It ’ mho besides worth keeping in heed that while your credit rat plays an important role in helping you qualify for credit, it is not the lone component that lenders consider. Factors such as the total of income you earn, how much money you have in the depository financial institution, and the duration of time you have been employed are besides reviewed. besides, keep in mind that anytime you cosign a loanword for another borrower, the cut record of payments on that loanword becomes your track record besides .

Related Posts