How do banks approve new credit applicants?

Applying for a line of credit can be a very simple process, or a bit more drawn out depending on the person. There are hundreds of credit services out there with the same number of options to fit your credit needs. But, if you can't even get through the application process, none of it matters.

When applying for credit, there are some things you may want to consider. Do you have a good credit rating? Do you make enough money to justify using credit? Most people don't have a clue about their credit score, or what an income criterion even is. If you fall into this category of "lack of information," go ahead and walk into your bank and ask to fill out an application.
Once you've filled out the application, don't get your hopes up, unless you're fairly confident your personal finances are in good standing, because you might be selling yourself short. The bank is going to run your information for validity, and to see if you'll be a good fit for the line of credit you've just applied for. The way they determine if you're going to be a good fit is by checking your previous credit history and looking at how much income you've made in the past few years.

If you've never had credit before, or been responsible with your previous credit, then you're already looking good to be approved. If you've had a steady income for the past three years or more, you're looking even better. But, if you've had a default, repossession, are still carrying debt on old cards, are unemployed, or have only been employed for a short time prior to your application, things may turn sour for your hopes and dreams of a new personal line of credit.

However, don't get discouraged if you fall into the "un-fit for credit" category. Once you've been denied a credit application, the bank is required, by law, to give you a letter of rejection that will clearly state why you weren't approved. This is the first step to credit recovery. Use this information to work with a credit counselor and rebuild your finances. After you've cleared up the blemishes on your record, you'll be well on your way to credit.

-A.J. Register