When Applying For A Loan, Put Yourself In The Lender’s Shoes (NAPSA)—If someone you didn’t know asked to borrow money from you, what would you need to know before you took the risk of making the loan? Mostlikely, you would want to know that this person had borrowed moneybefore and had a good track record of repayingit. Banks and other lenders are no different. They decide whether to loan you money based in part on the history they see on yourcredit report. They use this information to determine how muchofa risk you are—the lower your credit risk, the lower the interest rate they charge you. So what do lenders look for whenthey size you up? 1.Your payment track rec- ord. Whether you're applying for a credit card, cell phone service or new utilities hookup, creditors want to see that you have a history of making regular, on-time pay- ments. A single missed payment can lower your score. Bankruptcies, collections, judgments, defaults, liens, foreclosures or repossessions mayresult in a decline. 2.Your current debts. The less you owe, the better. What you spend each month on credit payments shouldn’t be more than 40 percent of your total after-tax Lenders decide whetherto loan you money basedin part on the history they see on your credit report. income. This is known as your debt-to-incomeratio. 3.Your credit history. Naturally, lenders want to see that you have a long, consistent track record of repaying what you owe. 4,New accounts. Lendersalso want to see how much new debt you're taking on. So it’s important to rememberthat each application you submit—regardless of whether you’re approved—will show up on your credit report and potentially lower yourscore. 5.Types of credit. Creditors want to see that you’ve had experience using different types of credit. They look more favorably, however, on some types of credit than others: a. A mortgage looks good as long as you've kept up your payments. b. Vehicle loans and bank loans can show a history of repaying a significant amount of money consistently over time. c. Credit cards can be a plus, as long as you’ve made regular payments and don’t apply for multiple newcardsin a short periodof time. Avoid using more than 35 percent of your total available credit. When is the last time you checked yourcredit report? It’s important to keep tabs on your credit report so you can: Know what lenders will see when you applyfor credit *Be sure the information is correct—andif it’s not, take steps to get it corrected See where you may have opportunities to improve yourscore. By law, you can request a free credit report once every 12 months from each of the nationwide consumer credit-reporting companies: Equifax, Experian and TransUnion. You can orderall three reports online at annualcreditreport.com. You can get the step-by-step information you need to help establish credit for the first time, improve your credit standing, get more credit or pay down yourcredit obligations at www.wellsfargo.com/smarter_credit.
