Credit Concerns

What do lenders look for in your credit report?

There are no general standards by which lenders judge potential borrowers.

That said, some factors can significantly influence your chance of securing loan approval. Your FICO score (think of this as your "credit rating") is an excellent place to start. FICO scores range between 300 and 850: anything 650 or above is considered a good credit score. If your score is below 620, you will probably find it difficult to borrow money at favorable interest rates.

Length of Credit History

A long track record of responsible credit use will improve your credit rating. 

How often you use your cards also plays a role. 

Your credit history length makes up 15% of your FICO score.

Outstanding Debt

Large amounts of outstanding debt are another significant concern to lenders. 

Basically, the less obligation you have, the greater your chances of getting credit. The principle here is like that involving payment history: if you have a large amount of existing debt, the odds that you will pay it back also decreases.

Late Payments

Problems with credit reports are usually related to making late payments on a debt. 

So, if you were late one month in paying off your credit card but otherwise have a good payment history, chances are that most lenders won't be too concerned. But if you have an account of late payments, you'll need to document the reasons why. A slow payment history won't necessarily get you turned down for a loan, but you may have to pay a higher rate of interest or else prove that you can repay your loan in time.

More than anything else, lenders want to get paid. So, a potential borrower's track record of making on-time payments is vital. 

In fact, payment history is an essential factor in calculating a potential borrower's FICO score – accounting for 15% of the score. No lender wants to loan money to someone who has demonstrated a second-rate commitment to repaying their debts.

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