How to Evaluate Your Own Credit Worthiness?

Few people think of evaluating their own credit worthiness prior to applying for credit. It has become a part of the financial culture to wait for the credit card company or the lending institution to tell us if we got the credit we applied for or that we didn’t. Having the foresight to evaluate your own credit worthiness shows a degree of common sense and a willingness to spend a little time on research instead of waiting for two to three weeks to be told by the lending party if we are credit worthy.

The first step in evaluating your own credit worthiness is to look at your own money. How much money do you have to repay debts? Do you have a savings account, and how much in cash savings is in your account? This is a factor that you should evaluate. It is one of the biggest deciding factors of whether or not you are credit worthy to get a bank to lend you money for a major loan of a mortgage or commercial loan for a business. Your own financial stability gives a good sign to the lenders that you can repay debts.

The next step to take on evaluating your own credit worthiness is to contact one of the major credit reporting agencies like TransUnion, Equifax, or Experian, online or on the telephone. You will get quicker results by contacting them online. These credit reporting agencies provide a good introductory preview to your credit but in order to evaluate your credit worthiness, you need a comprehensive credit report and credit score.

By registering with them, you will soon get access to your credit rating as it will be reported to lenders by a credit rating agency. If you can clear up some of the negative remarks from past lenders on your credit report, you stand a better chance of getting new credit.

Evaluating Your Own Credit Report

On your credit report, companies and lenders will look at a few things before considering the loan. The following are a list of things you should also be aware of while you evaluate your report.

  • Late payments – How many late payments do you have on your credit report? More recent late payments (30 days) will not be as problematic as older ones, those older than 3 months.
  • Delinquencies – A credit card company will report your late payments as delinquencies if you fail to pay their minimum payments. Some banks will report after 30 days and most report after 60 days. These delinquencies tend to remain on your report for 7 years.
  • Bankruptcies – Complete failure to repay debt. The more recent the bankruptcies are, the worse they look to lenders.
  • Outstanding Debt – How much money you own or how much credit you have used up.
  • Credit History Length – The longer the length of credit history, the more favorable you look in the eyes of the lenders. This is just another factor of having experience and be able to handle credit.
  • Recent Credit Applications – Applying for new credit will raise flags that you are either in financial turmoil or looking to buy something. Credit denials will look bad to lenders as will lots of credit applications.
  • Current Types of Credit – What kinds of loans and credits have you recently taken? Getting credit from credit cards is different from getting credit for a home loan.

By taking these steps, you can come to a mature decision as to your credit worthiness before you turn yourself over to a lender who might embarrass you in front of family if they also receive a copy of your acceptance or denial for new credit.

There might be other reasons to evaluate your own credit worthiness like when applying for a new job and needing a clean credit rating report with no delinquencies or even bankruptcies. If applying for work and if you know your prospective new employer does a background check, you might explain your bankruptcies before your background information reaches the personnel office.

You can do a simple check to evaluate your own credit worthiness if all of this is too complex, simply call your own bank and ask for one of their credit cards. If you get one, your credit is okay. Just know that getting more credit immediately after getting a credit approval will raise flags on your record.

Pay attention to these tips so you can start improving your credit scores to ensure a loan.

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