Wednesday, 17 September 2025

What Lenders Really Look at Besides Your Credit Score

When it comes to applying for a loan or finance, most people believe the decision rests entirely on their credit score. While your score is important, lenders actually look at a much broader picture. Understanding these factors can help you prepare, strengthen your application, and improve your chances of approval. 

  1. Your Income and Employment Stability
  • Consistent income is key. Lenders want to know you have the ability to repay what you borrow. 
  • A steady job history (e.g., 2+ years with the same employer) is seen as more reliable than frequent job changes. 
  • Self-employed applicants often need to provide extra documentation (like tax returns and business financials). 

 

  1. Debt-to-Income Ratio
  • Lenders don’t just look at what you earn — they compare it to what you owe. 
  • This ratio shows how much of your income is already committed to repayments. 
  • A lower debt-to-income ratio means you have more capacity to take on additional credit. 

 

  1. Existing Financial Commitments
  • Current loans, credit cards, buy-now-pay-later accounts, and even recurring expenses (like child support) are all considered. 
  • Even if you make repayments on time, high levels of existing debt can limit your borrowing capacity. 

 

  1. Savings and Assets
  • Having savings or assets (like a car, shares, or property equity) demonstrates financial responsibility and provides security. 
  • Many lenders see a “rainy day fund” as proof you can handle unexpected expenses without missing loan repayments. 

 

  1. Repayment History
  • Lenders look beyond defaults — they also review your track record of on-time payments. 
  • Even one or two missed payments on utilities, phone bills, or credit cards can signal risk. 
  • Positive repayment history, on the other hand, strengthens your profile. 

 

  1. Credit Enquiries
  • Every time you apply for credit, an “enquiry” is added to your file. Too many enquiries in a short time can make you look desperate or risky. 
  • Lenders prefer applicants who apply for credit strategically, rather than frequently. 

 

  1. Type of Credit You’ve Used
  • Payday loans, buy-now-pay-later accounts, and short-term finance can raise red flags. 
  • Long-term, well-managed credit (like a car loan or credit card with a good history) is viewed more favourably. 

 

  1. Stability in Living Arrangements
  • Lenders often check whether you’ve lived at the same address for a reasonable period. 
  • Owning or long-term renting shows stability, while frequent moves may be seen as a risk factor. 

 

Final Thoughts 

Your credit score matters — but it’s not the whole story. Lenders assess your overall financial behaviour, including income, debts, savings, repayment history, and stability. By improving these areas, you can make yourself a stronger candidate for finance, even if your score isn’t perfect right now.