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Articles » Free Annual Credit Report | | What Lenders Look for in a Credit Report? |
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If you are planning to apply for a loan with lowest interest rates possible , you really should know what exactly the lender is going to be looking for in your credit report. Never feel as if you are at the mercy of the bank. You're not. Understanding what determines who gets a loan and who doesn't, gives you leverage when you walk in and will result in better terms if you just do a little homework.
Put yourself in the bank's position. If you are asked to lend someone money, what are the main factors you're going to be looking for to determine risk? You'll probably want to see some kind of credit history, with payments made on time, no defaults, and not too much still owed out. These are all listed on your credit report and you can see it for yourself before you even walk in to the bank.
Another item that a bank will look at is personal stability. Does your credit report show you changing addresses every six months? Staying in the same place for a while shows that a person is setting down roots and pays their bills. The same can be said for the number of vehicles you've financed in the past five years. Multiple loans back to back create a mountain of debt. If you're a banker, you certainly don't want someone with a history of overextending themselves.
Tax liens, legal judgments, and bankruptcies are all red light indicators for bankers as well. Lending money to someone who will subsequently have it seized by the IRS or the courts is not good business practice. The likelihood of the customer paying it back goes down significantly if there is no gain involved for them.
Think like a banker. Pretend it's your money and someone is coming to you asking to borrow it. Get a copy of your credit report and examine each of the areas outlined here to see if you are a good risk. If you know what they are looking for, you have better ground to stand on while you negotiate terms. Interest rates and the length of the loan are determined almost entirely by the information on your credit report. Examine it and correct the areas that you can, before you enter the bank and apply for the loan.
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