New Credit Problems

While credit can help you buy a house, car or make purchases without having to use cash or checks, you may run into problems with new credit. People with problems obtaining new forms of credit can often improve their chances by first understanding what causes lenders to deny credit. Once you know how the system works, you can use that knowledge to help yourself obtain new credit.

Creditors

When you apply for a loan or new form of credit, whether it is a credit card, mortgage or debt consolidation, your creditors will only grant you the loan if they believe you will pay it back. To convince a creditor you won't default on the loan, you have to prove that you are a reliable borrower, and to determine if you are reliable, lenders typically look at several key factors, such as your credit reports, income and your debt-to-income ratio.

Reviewing Your Credit

It's important to know exactly what your current credit status is before you try to apply for a new loan. Your credit report tells a lender how you've used credit before, and a bad credit report can prevent you from getting a loan. The Federal Trade Commission has authorized annualcreditreport.com as the only government approved website to provide consumers with their yearly free copies of their credit reports. If there are any mistakes or errors on your report, you can have these removed, but you cannot remove accurate information.

Credit Repair

If you don't have a good credit history, this is probably the main reason you're having trouble getting new credit. While you cannot simply change the past and remove your bad history from your credit report, you can start rebuilding your credit immediately by showing lenders you're a responsible borrower. The best way to start rebuilding is to simply pay all your bills on time and not use more credit than you can reasonably manage.

Other Factors

Your credit report is not the only factor creditors use to determine if you should get a new loan. Lenders also want to know how much money you make, as well as how much debt you currently owe. For example, Lending Tree reports that mortgage lenders typically prefer lenders whose monthly debt obligations take up no more than 36 percent of their monthly income. If you increase the amount of money you earn or decrease the amount you're paying in bills each month, this makes you more attractive as a potential borrower.