A Lenders View of Creditworthiness

When lenders consider approving your auto or personal loan, mortgage, credit card, and other types of applications, they take a good, long look at your credit report. While not every lender is the same, there are certain things that lenders typically look for when deciding your creditworthiness. Let’s take a look at their priorities.

Payment History

First and foremost, lenders want to know that you’re going to pay them. When considering loan approval, lenders give payment history top priority. It’s also the top factor used when calculating your FICO or VantageScore — for FICO it makes up 35% of your score; VantageScore is 40%. So how do you ensure a solid payment history? Make your payments on time, every time. Think about scheduling them automatically if you can. When lenders see late payments they see a big red flag.

Credit Usage

The next consideration of creditworthiness is your total debt and your credit utilization rate. If you have a lot of outstanding debt, you might not be able to handle more. Likewise, if your credit utilization rate is high — and credit utilization is defined as the amount of credit you’re using compared to your total credit limit — lenders might think adding any more debts is a recipe for disaster.

Credit Longevity

Another important factor considered by lenders is the age of your credit. A long history of good credit usage helps your case for new credit. It shows lenders you can handle debt responsibly.