How Are Credit Decisions Made

Reproduced from www.experian.com*

Potential creditors review credit applications primarily in relation to risk. They try to predict whether you'll repay your debts on time by evaluating your character, capacity and collateral/capital.

• Character: Your length of residency and employment help credit grantors develop a feeling of your personal stability. They get this information from your credit application. Lenders evaluate your financial character by reviewing your existing credit relationships: credit cards, bank loans, mortgages, etc. This information comes primarily from your credit report.

• Capacity: Your living expenses, open credit limits, current debts and other payments give lenders a sense of how much debt you can realistically pay given your income. Lenders look at your living expenses, current debts and the additional payments that the proposed new obligation would require. This information comes from your credit application and credit report.

• Collateral/capital: Whether the loan is secured by a down payment or asset - and how much that down payment or asset is worth - helps lenders determine the terms of the credit or loan they extend to you.

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*Reprinted with permission of Experian copyright 2001. For more information visit www.experian.com