How Lenders Look at My Bad Credit Report

Your ability (or lack of) to borrow money or have credit extended on your behalf is one of the most important assets you have. Your credit score can be considered to be a very important factor, not just by potential lenders, but by potential employers and even landlords. If your credit score is low, you will have trouble not only borrowing money, but will also find difficulty getting a job or renting a decent apartment or home. You can learn the steps to becoming a better borrower to improve your score and qualify yourself for better loans and credit cards.

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Your FICO Score Determines Creditworthiness

The outlook for those of any credit type who are seeking loans is bleaker now than ever before due to the recent credit crunch and global financial crisis. But the determining factor in whether or not you will receive the loan that you need - and how much the credit will cost you in terms of interest - is your FICO score.

Your FICO credit score is a number between 300 and 850, and is used to communicate your credit history and behavior to potential lenders before they decide to extend money to you. You could consider the FICO scale an index that gives the lender a glimpse at the risk he may or may not be taking if you are approved for the loan you want. The higher your FICO score - the higher your chances of getting approved for the credit you desire, and the lower your interest rate will be.

What Potential Creditors Look For

Your score is a tell-all when it comes to your credit. The biggest thing that potential lenders look at is your payment history - or more specifically, the timeliness of your payments. Paying on time is the easiest way to add points to your FICO score. Another thing that creditors look at is how much credit you use each month as compared to how much you have available for use. In general, this should be no more than thirty percent of your available credit lines, across the board, with all sources of credit considered. Creditors also look at the length of time that you have an account open - in this case, the older the better.

Having an account in good standing for several years is very appealing to potential creditors because it shows them that you are a responsible and trustworthy borrower. The number of credit inquiries that have recently been run when you apply is also looked at. Potential lenders do not like to see multiple attempts within just a six month or so period. Applying for too much credit is very detrimental to your credit score - it gives the impression that you are on the prowl to borrow from anyone and everyone.

Where You Can Rebuild Your Credit

For those with damaged credit who are looking to rebuild their credit histories, the Internet provides a wealth of lenders who market their products for those specific borrowers. You can find great deals on bad credit loans and credit cards for bad credit by going with an online lender that specializes with at-risk borrowers.

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