Credit Score - Scoring Points with Lenders

TO DETERMINE whether or not you qualify for a loan, many lenders evaluate you according to a mysterious point system.

They keep their credit rating systems secret, so it is difficult to find out what information is worth the most points in determining whether you get the credit you seek. Almost certainly, however, you will be scored on the number and types of existing loans and charge cards you have. It helps a lot if you already have and use other forms of credit. The most desirable types you can have are the travel and entertainment cards, followed by bank credit cards and department store charge cards. If you have a good record for paying credit card bills and installment loans on time that is a plus. But lenders do not like to see loans from finance companies. A significant percentage of bad credit risks have been in debt to finance companies. If your payment record with such companies is good though, you shouldn't lose points.

Your income may help you pass the credit test, but lenders know that someone who earns $40,000 a year is not necessarily twice as creditworthy as someone who makes $20,000. If more than 35% to 40% of your gross income goes to paying off current debts, including mortgage and auto loan payments, lenders are not likely to approve your application. In general, you are better off if you own your home rather than rent, and if you already have a checking or savings account.

If at first you don't succeed, get a copy of your credit bureau report. There may be mistakes. If so, clear them up and apply again. Ask why you were rejected and offer additional information. Or, go to another lender or credit card issuer. Each one has different standards.