You probably think your credit score is the main thing that lenders and creditors use to decide whether to give you a loan. But they use other tools to measure your creditworthiness and whether you\u2019ll have a tough time repaying a new debt.<\/p>\n\n\n\n
Keeping your credit in top shape involves more than making your payments each month. Even if you make minimum required payments, your credit score may not be optimal.<\/p>\n\n\n\n
Definition of \u2018Credit\u2019<\/strong><\/p>\n\n\n\n Credit is a contractual agreement in which a borrower receives something of value now (usually money) and agrees to repay the lender at some date in the future, generally with interest.<\/p>\n\n\n\n What do Lenders Look at to Extend a Loan?<\/strong><\/p>\n\n\n\n Lenders look at things like your debt-to-income ratio (DTI), credit utilization, and total amount of debt on your credit profile.<\/p>\n\n\n\n Debt-to-Income Ratio<\/em><\/p>\n\n\n\n Lenders use the DTI ratio to see if you have enough income available to pay your debts. You know you are suffering from a high debt-to-income ratio if, once you pay your fixed expenses (like housing, other loans, and utilities), there is very little left over at the end of each month. The higher the DTI, the less likely you will be able to repay the requested loan and so the less likely you will be approved.<\/p>\n\n\n\n Credit Utilization<\/em><\/p>\n\n\n\n How much of your available credit do you actually use? Do you borrow the maximum on your credit cards each month? A high credit utilization rate will negatively impact your credit score.<\/p>\n\n\n\n