Credit Score

• Lenders look at the borrower's credit score as one of the major factors in loan and credit card approval. If you have a high credit score, this means that you have managed credit well in the past and are likely to continue the pattern in the future. Your credit score compiles information about your payment history, account balances, length of credit use, types of credit and new accounts. If your low credit score causes you to not qualify for the best interest rate or to have your application denied, the lender will send you a notice explaining the impact your credit score had on your application.
  
  

Income

• Creditors generally ask for your current income as an estimate of how much credit you can manage. It is generally used in conjunction with your other debt obligations to make a lending decision. In the case of a credit card, a low income will likely result in a lower line of credit than you would get if you made more money. Mortgage and home equity lenders generally require that your total monthly debt payments, including the loan for which you are applying, be no more than 36 percent of your gross monthly income.
  
  

Collateral

• Some types of credit require you put down collateral on the loan. The collateral is an asset that the lender can seize and use to pay off the debt if you do not make payments. In the case of mortgages and home equity loans, this asset is your home. The lender appraises the home to ensure that its value is high enough to secure the debt. Most lenders require private mortgage insurance if you borrow more than 80 percent of your home's value. Some credit cards also factor collateral into lending decisions. If you are applying for a secured credit card that requires you to make a deposit with the lender, this collateral will give you a better chance of approval than if you were applying for an unsecured card.
  
  

Tips for Approval

• The best thing you can do to help credit decisions go your way is to build a good credit score. Pay your bills on time, borrow only when you need to and avoid borrowing your full credit line on revolving accounts. You should also check your credit report to ensure that it accurately represents your borrowing history. If you are applying for a mortgage, be prepared to show documentation of your income. You will likely need tax returns, W-2 forms and recent pay stubs.