What do lenders consider before granting credit?

Though all credit providers are different, in general their decisions boil down to a single issue: If they lend you money, send you a credit card, or give you goods or services, will you pay them back? To help them predict the answer to this question, lenders consider:

• How much money you make
• How long you've lived where you live now
• How much your home, car or other assets are worth
• How much money you have in the bank
• Whether you pay your bills on time
• How long you've worked for the same company
• How much money you owe to others

These factors fit into three categories, which are known as the "three C's of consumer credit."
Character: Your length of residency and employment give credit grantors an indication of your personal character. They get this information from your credit application. Lenders evaluate your financial character by reviewing your existing credit relationships: credit cards, bank loans, mortgages, etc.
Capacity: Your living expenses, open credit limits, current debts and other payments give lenders a sense of how much debt you can realistically pay given your income.
Collateral/capital: Whether the loan is secured by a down payment or asset--and how much that down payment or asset is worth --helps lenders determine the terms of the credit or loan they extend to you.