You are probably aware of the obvious things that affect a credit score and can cause a lender to deny you credit — making late payments, collections, filing bankruptcy, or foreclosing on a house, for example. But there are several subtle credit issues that most borrowers do not realize are commonly used by lenders in considering credit applications.
One of the issues lenders can hold against borrowers is applying for multiple new credit card accounts. This sends a red flag to lenders that you’re either in some type of financial trouble, or you are getting ready to take on a large debt, whether it’s true or not.
If you are applying for other types of credit, such as a student loan, auto loan or mortgage, it is a good idea to apply for them within the same two weeks, which bundles similar inquiries in the same two-week period and counts it as one inquiry for credit scoring. Applications for credit cards, however, do not have this same grace period.
Another thing many borrowers are unaware is that co-signed loans are considered exactly the same as loans you’ve taken out yourself. The full debt shows up on your credit report, as do any delinquencies reported in connection with the loan, such as if the borrower makes late payments.
Making only minimum payments can also hurt your chances at getting a loan because lenders see this as proof that you can’t pay off your balance. It logically follows that they are going to avoid extending you additional credit if they think you are unable to pay off what you already owe.
Finally, taking out cash advances signals desperation to lenders, leading them to the conclusion you are either unemployed or underemployed, causing them to deny you credit.
Knowing what affects your credit is important if you are seeking a loan or attempting to obtain a new credit card. Correcting some of these subtle things can improve your score and help you get the credit you want.