What Lenders Look For in Credit Reports

Your lender may look at many different factors when setting limits on business credit cards or determining the amount of equipment financing you can qualify for. It all starts with your credit report. 

Credit Score

A credit underwriter will begin by looking at a credit report obtained from one of the three major credit reporting agencies — Equifax®, Experian® or TransUnion®. Within the report is a credit score—the measuring stick used to estimate a customer’s repayment risk. The credit score is a mathematical formula developed by the credit reporting agencies to determine the likelihood of a borrower to repay debt. Credit scores can range from 300 to 850. The higher your credit score, the less risk there may be for the lender and the more likely you are to be approved.  Here is a more detailed look at what goes into your credit score.

Other Factors Inside a Credit Report

Besides the credit score, underwriters will examine other things contained within your credit report. For example, they’ll look at the type and amount of debt you’re carrying. While the amount of debt alone doesn’t always influence your score in a negative way, it’s something you should keep in mind. Why? This amount directly affects your debt-to-income ratio, which is important to lenders. The types of debt you carry such as real estate loans, installment loans, and revolving debt (such as credit cards) will also be analyzed.

A high amount of revolving debt tends to lower your credit score, as does a history of past-due payments, bankruptcies, judgments or collections. A credit report also shows underwriters how many times other lenders have inquired into your credit. If inquiries are frequent, it could give the impression that you’re at risk of over-extending yourself financially. Monitoring your credit report for accuracy (so you can correct any mistakes) and ensuring you have a solid credit history are key to obtaining any type of credit. 

Other Factors, Including a Strong History

Other factors considered outside of a credit report include length of time in business, home ownership, number of years at current residence, any rental agreements, as well as personal and business bank account information.

Ultimately, the most important thing for lenders to feel comfortable with when lending you money is ensuring you have the ability to repay your debt obligation.  If you’ve shown a history of managing your debt wisely and have maintained an excellent payment history, you’re much more likely to be readily approved for higher credit card limits and equipment loan amounts.

We invite you to learn more about the honest and fair financial solutions through Professional Solutions Financial Services.

Posted by:
Terry Vaudt

Published in:
MilesAway Mastercard

Dated posted:
Sep . 8, 2014

Blog Categories:
Credit Card Processing
Equipment Loans
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Information provided in the Posts & Articles section of the Professional Solutions Financial Services website is designed to educate healthcare professionals and other small business owners and provide tips related to money, credit and financing. Contributors are sharing their expertise and experiences. This does not constitute advice or endorsements by Professional Solutions.