How do lenders review my credit reports?

Say you apply for a new credit card from ABC bank. ABC bank will purchase your credit report from the credit agencies. Because a lender’s main concern is if you will pay back the money it loans to you on time, here is what the lender looks at:

How to Think Like a Lender
Lenders want to find out:	Because:	Rule of Thumb
If you pay your bills on time.	If your report shows you have a habit of paying your bills on time, it is likely you will pay the lender on time, too.	Pay all of your bills on time, always.
How much you owe, or how much of your credit you use.	If you max out on your credit limit, or come close to it, it might be likely you’ll default on a new loan.	Don’t use more than 30 percent of your credit limit.
How long you’ve had credit, or how long your credit accounts have been open.	The longer you’ve had credit, lenders believe, the better.	Don't close unused credit card accounts.
If you frequently apply for credit.	If you frequently ask for credit, you might be in credit trouble.	Wait six months between applying for more credit.
The type of credit you use.	Lenders look at your credit more closely to approve you for an installment loan, but less to approve you for a credit card.	Having a history of paying on an installment or mortgage loan is good for your credit, but not necessary to get credit or improve your credit.
If you owe back taxes (have tax liens), foreclosures, bankruptcies, wage garnishments, lawsuits, or judgments.	This will affect whether you receive credit at all, and if so, at what interest rate.	Pay all of your bills on time, every month.

After the lender reviews your report, it decides whether or not to lend you money, or “approve your credit.”

What does “approve your credit” mean? It means a lender has reviewed everything on your credit report and decides that you are credit worthy. Being credit worthy means a lender believes you are able pay back what you borrow, on time.