How does a lender use a credit report?

Lenders use credit reports to evaluate applications for credit cards, other lines of credit and loans. Many sophisticated lenders also have their own proprietary scoring models to evaluate potential clients using credit report data.

The most important factor employed to determine your creditworthiness is the payment history reflected on your credit report. Keeping all your accounts in good standing by making on-time payments is ideal.

Additionally, lenders review the amount of your outstanding debts, your credit limits and credit inquiries. It’s important to keep your credit utilization below 30% and avoid unnecessary credit applications. Large amounts of debt, reaching or exceeding your credit limits, or several hard inquiries in a short period of time can indicate overspending and irresponsible credit use.

You can check your credit report yourself for free here at WalletHub, where you’ll be able to get daily updates.