In many cases a lender extending you credit may never actually meet you. And, most of the time, they won't have an opportunity to learn what type of a person you are or to discover for themselves if you are a trustworthy, capable individual. Often, all they have to make a judgment about your ability to pay is by looking at your credit history-; which is an accounting of your ability to repay debt.

When determining if they should extend credit to you or not, lenders may order one of two different types of credit reports in order to examine your credit history:

• Quick Credit Check-This is a basic credit report, showing information from one, two or all three national bureaus. The basic report provides information on your debtors, past and present, and on what type of payment history you have.
  
  
• Residential Mortgage Credit Report (RMCR) - A lender will require this report if you are buying a home, and as such applying for a large loan amount. The lender will pull reports from at least two, and usually all three, bureaus. In addition, your current employment may be verified and public records searched for bankruptcies or liens.
  Lenders are primarily looking for three things when they pull your credit file. The first is your character. Lenders want to know if you are someone who acts responsibly, takes their debts seriously and pays their bills on time.
  
  

Secondly, a lender will look at your capacity to pay your bills on time. This is based upon your income, or the joint income of you and your spouse, and how that corresponds to your total debt.

Finally, a lender will take a look at the possessions you currently have, or your collateral. You might have a car, valued at $10,000, that is already paid off. Your ability to payoff this loan demonstrates that you had the character to eliminate this debt and provides the lender with a possession which can be used as security against repaying the new loan.

All three factors, your character, your ability to pay and possessions or collateral, help provide lenders with needed information which is then used to determine whether or not they think you are creditworthy.

< BACK