If you have ever applied for a new vehicle, credit card, a mortgage or anything needed financing,you might have seen that your credit was ran. But why was that? Why do creditors run your credit and what does it tell them? Below is a list of what they are looking for as far as credit report wise and what you need to know to before you run your credit report.
What are they looking for
When creditors run your credit report they are looking for a specific number of things, but mainly wanting to see how responsible you are when it comes to taking care of your finances.
- Credit health- A major part of your credit being ran is going to be what does your score look like? On average creditors like to see of a credit score at least in the 700 range. But that;s case by case so if your not in the 700 range do not freak out it might just take you a little longer to find an approval.
- Accounts in collections- Once you have an account go into collections ( usually a creditor sends your account to collections because the loan defaulted or the contract was not honored) it stays on your credit report for an average of seven years. When a creditor runs your credit the number of collections that you have in your account show up. The less you have the better.
- Credit inquiries- When a creditor checks your credit they look at how many inquiries you have. To many inquiries can be a bad thing because it makes the creditor think that your trying to take on to much responsibility by trying to open up so many lines of credit. Credit inquiries take two years to fall off your credit report. So be sure you do your research before running your credit to avoid unnecessary inquiries on there.
- Debt to income ratio- Your debt to income ratio is basically talking about how much money you have coming in and how much debt you have. Having to big of a debt to income ratio can scare potential creditors away. A source from credit report api says that “Not regularly knowing your debt to income ratio can be disastrous because you can end up taking to much on debt wise”
- Payment history- Another major item they are checking for is your payment history and how well or bad you have been able to keep up with payments in the past. Everything you take out will have a payment tracker showing if your made your payments on time or late. It is better to pay everything on time rather than late because it shows banks and creditors that you are able to keep up with your payments.
How to be ready for when your credit is pulled
When you are ready to have your credit pulled we strongly recommend doing your research by look at your credit report below are steps to how to be ready to have your credit report ran.
- Research- You want to always do your research before you go out and buy something. Make sure that you are going to be able to handle the payments even for five years. Knowing how much debt your taking on is important.
- Look at your credit report- Make sure that your finances are in good shape. See if there is anything that you could do to insure a better looking credit report. Once you have decided that this is going to be financially smart decision then have your credit ran. You want to have as little inquiries as possible.
Running your credit report should not be difficult if you need credit help we highly recommend reaching out to a professional!