What Creditors Will Look For and How to Build Credit-Worthiness

There are several steps you can take to begin the process of applying for credit.  First, it’s a good idea to know what creditors look for when considering your application for a loan or credit card. 

Creditors want to know that you are a good credit “risk;” quite simply that you are likely to repay the money you borrow.  You can demonstrate that you are likely to be a good credit risk – even if you haven’t used credit in the past – by beginning to do, or continuing to do, some simple things such as:

  • Remaining at your job.  Introduce some stability into your employment history – if you have not worked at one job for more than a year, you should consider whether your present job, or your next job, is one that you could stay in and one where you could gain helpful skills, knowledge, and experience. 
  • Remaining in your residence.  Creditors like to see that you are reliable in paying rent for an extended period of time.  Like your job, plan to remain in your current residence or the next one you move to for more than a year to help build your credit-worthiness.
  • Opening a bank account. You will most likely need to repay your creditor by using a check or money order or perhaps paying online through a bank account, not cash.   Opening a bank account – savings or checking account – demonstrates to creditors that you are taking responsibility for your personal finances and are perhaps more ready to assume the responsibilities of managing and repaying credit. 
  • Compiling a cash receipt file.  Keep receipts and documentation of any payments that you make regularly when paying by cash, check or money order.  For example, keep cancelled checks or ask your landlord for receipts for your rent payment.  Keep receipts of utilities that you pay (i.e. electricity, water) or regular services that you pay for (i.e. trash removal). When applying for credit, particularly through a local bank or store, you can then use your record of paid receipts to demonstrate that you have been responsible in managing the credit you have been extended to date.