How Financial Institutions Make Credit Decisions

From personal loans, to auto financing, to home loans-applying can be an intimidating experience, particularly if you have credit problems or a troubled credit history. Put yourself in control. Understanding the loan process, related costs, and your options is a good place to start.


When lenders review a credit application, they look at these three factors:

  1. Credit history: How well you've paid debts in the past.
  2. Current obligations: How much you currently owe each month.
  3. Income and assets: How much you currently earn and own.


Most lenders use computerized scoring systems to rate you on each factor. Your credit score can determine if you will be offered credit, the amount of credit you may be offered, and may even determine how much you will pay for credit (your interest rate and fees). Keep in mind that different lenders have different scoring systems, so if you’re turned down by one lender, you might be approved by another.

At Citizens Finance, our loan officers use their years of experience to get to know the borrower, their situation and their needs to make the loan decision without using a scoring system.
Lenders generally don’t have the time to personally investigate credit histories. Instead, they rely on credit reports from one of the credit bureaus that collect and sell this information. The three major credit bureaus in the United States are Equifax, Experian and Trans Union. A credit report is essentially a "report card" on how you have handled credit in the past. Credit reports contain four types of information: identifying information, credit information, public record information and inquiries. This includes:


Identifying Information

  • Your name
  • Your current and previous addresses
  • Your Social Security number
  • Your year of birth
  • Your current and previous employers
  • If you’re married, your spouse’s name


Credit Information

This includes credit accounts or loans you have with:

  • Banks, finance companies or credit unions
  • Retailers
  • Credit card issuers
  • Other lenders


Public Record Information

This includes any information that’s contained in state and county court records, such as:

  • Bankruptcies
  • Tax liens
  • Monetary judgments
  • Delinquent child support


Credit Inquiries

These indicate to other lenders that you have applied for new credit (which could result in additional debt). Potential lenders view multiple recent inquiries on your credit report as a sign that you may be overextending yourself. 


Review Your Personal Credit File

Individuals are able to get a copy of their credit report once per year at no cost by visiting www.annualcreditreport.com or calling 1-800-916-8800.