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What Lenders Look for In Your Credit Report

September 16, 2009 | Credit Reporting | No Comments

Whenever you apply for a loan, the lender will evaluate your credit risk by trying to determine the likelihood you will make payments on time and pay off the loan.  There are various things that they look at on your credit report to determine this.

Number of Inquiries
Lenders look at the number of “soft” and “hard” inquiries into your credit report.  Soft inquires are made when an existing lender or you check your credit report.  Hard inquires are made when you apply for a loan and will affect your credit score.  The fewer hard inquires you have the better.  If you are shopping around for a loan, consider doing it in a 14 day window because all inquires will count as only one.

Different Type of Credit
Lenders will look at your open credit accounts, accounts closed up to 10 years ago, amount owed and the initial or limit loan amount.  Lenders want to see that you can handle different types of credit.  A long history of handling debt will help your credit score so it’s a good idea to keep your oldest credit cards open and active.

Paying Your Bills On time
Lenders will look at your payment history to determine if you pay your bills on time.  The more times you are late paying your bills will be less appealing to a lender.  If you have one or two late payments with an existing lender, you may want to ask for a good-will adjustment to remove them.

How Much Credit You are Using

Lenders will look at how much you owe on credit cards relative to your limit.  Creditors usually report this information to the credit bureaus the day the billing cycle closes.  You should always use less than 20% of your available credit.

Serious Credit Problems
Lenders will look closely at any liens, delinquent accounts, foreclosures and bankruptcies on your credit report.  Keep in mind these problems will show up on your credit report for 7 to 10 years.   However, you can add a personal statement to your credit report if something needs explaining.  This may help your case if applying for a loan.

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