When you apply for any loan there are many factors that the lender considers when deciding whether or not to approve the request you made for a loan. More than anything, the lender wants to know that you have been trustworthy and dependable with money borrowing in the past.

The best indication that you can manage your money is your history with other credit and loan companies. In order to make a fair and reliable assessment of people’s credit is to use a specific scoring system. This system has been used by banks and auto lenders for quite some time and has just recently begun being used by mortgage lenders.

Your credit scored is determined by information acquired from credit bureaus and creditors you have been credited by in the past. Records from these companies will disclose information on your credit history such as the amount of the loan you borrowed or the amount of credit you used, the current or outstanding balance, the timeliness of your payments, and other various facts and figures regarding your credit background.

All of this information is compiled to create your credit score. Your score is calculated by the credit bureau, not your lender. Basically, the score tells the lender how much they can trust you to pay them back, or how likely it is that you will pay them back. If the score is low, they will probably not take the risk and approve your loan.

You will want to inquire about your credit in order to know where you stand and to make sure you do not have any credit information that you are unaware of (or accounts still open that you did not know about), but a large amount of inquiries will probably affect your credit report, so be careful about inquiring about your credit if there is not a good reason to do so.

Credit scores range from 300 to 900 and, usually, the higher the score, the more likely it is that you will be approved for a loan. The credit score is an objective and quick way to evaluate your credit and money history without going through an extraordinary amount of information and paperwork.

Still, keep in mind that the credit score only one of many factors lenders depend on to evaluate your loan and that even with a poor credit score, you have the opportunity to improve your credit and/or obtain a loan with less-than-perfect credit.