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Your Credit Report: What Lenders Want to Know

There are a variety of factors financial institutions will look at when determining credit limits on business credit cards and the amount they will lend you for things like equipment loans.  Because D.C.s tend to be sole proprietors who own their own business or they work as associates, lenders use more personal information than you may think.

A credit underwriter will start by looking at a credit report obtained from one of three major credit reporting agencies (Equifax®, Experian® or TransUnion®).  Within the report is a credit score—the measuring stick used to estimate repayment risk of the customer. A 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.

Besides the credit score, there are other things contained within your credit report that an underwriter will analyze.  For example, they’ll look at the type and amount of debt you are carrying.  While the amount of debt alone does not always negatively affect your score, it is something you need to pay attention to as it affects your debt to income ratio.  The types of debt you carry such as real estate loans, installment loans, and revolving debt like 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 are at risk of over extending yourself.

Monitoring your credit report for accuracy (so you can correct any mistakes) and ensuring you have a solid credit history is very important to obtaining any type of credit.  Other factors considered outside of a credit report include time licensed or in practice, home ownership, renting, length of time at current residence, as well as personal and business bank account information.

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

NCMIC offers a travel-based rewards business card with no annual fee as well as fair and honest equipment financing.  We invite to you to learn more today.

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