What Do Lenders Want To See When You Apply For Credit?

[ 0 ] June 2, 2015 |

creditScoreImagine you’re shopping for a new credit card. You’re a savvy consumer, so you’ve done your homework: read reviews, compared rewards and interest rates, even checked your credit score.

But armed with this information, how do you know whether a lender will approve your application? Or what kind of credit line you’ll receive?

The key is to understand not just what makes a good credit score but how creditors use data about you to make a credit decision. As it turns out, your credit score is just one piece of the puzzle.

Banks want to know one thing: What’s the risk?

Many people don’t pay back their loans, resulting in billions of dollars lost by banks every year. To stay in business, lenders must limit these losses however they can. So, when you apply for credit, the lender wants the answer to one simple question: “What’s the risk that you will not pay us back?

Using a proprietary formula, the lender crunches the data on your application and credit report to make a best guess about your risk level. If your risk level is tolerable, the lender will approve your application. If your risk level is too high, the lender will decline your application. If your risk level is in between, the bank might offer you an account at a higher interest rate or a different product.

But what do banks look at in your credit report to determine your risk level?

Credit score

It’s easy to become obsessed with your credit score. It bounces around from month to month and it’s satisfying to watch it climb as you manage your credit responsibly.

But as you think about how lenders look at your application, your credit score is the starting point, not the final word. If your credit score falls below a certain threshold, the lender may simply decline your application right off the bat. More likely, however, they’ll dig deeper and apply their own methodologies to judge your risk level.

Payment history

As you probably know, paying your credit accounts on time, every time is the single most important thing you can do to build good credit. A history of timely payments leads to a good credit score and your lender will check for this, too.


David Weliver, MoneyUnder30

But most lenders don’t just want to see that you’ve made timely payments; they want to see that you’ve been making timely payments for a long time.

The age of your accounts is an important factor in credit decisions. So even if you’ve faithfully paid a credit card and student loan for two years, you’ll be seen as riskier than someone who’s been paying on accounts for 15 years (even if he or she missed a couple payments along the way!)

This can be challenging for younger adults trying to establish credit, as there’s no way to know how long of a credit history a lender requires for approval.

This blog is part of a content partnership with Barclaycard Ring. To read this blog in its entirety and to find out more about how to improve your credit, click here.

David Weliver is the founding editor of Money Under 30. He’s a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children. Follow Dave and MoneyUnder30 at:




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About David Weliver: David Weliver is the founding editor of Money Under 30. He lives near Portland, Maine with his wife and two young kids. Since 2006, he's been blogging about beating debt, increasing earnings and investing wisely [...]
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