How do you get the loan?
Christy Heady • Bankrate.com

Can you make the grade?

It's not the credit agencies that give you the thumbs up or down on your loan applications. It's the outfits where you apply for credit. Lenders insist that it's the "three C's" they use in lending money or lines of credit: Character, Credit and Capacity.

Character is determined by how long you've lived at the same address or worked at the same company -- not what kind of person you are. If you're a job hopper, it will show up on your credit report and some lenders may consider this as negative information.

Credit shows potential lenders and other creditors your credit history. Do you make timely payments? How long have you had credit accounts? What is the credit limit you're allowed on each one? 

Capacity shows a lender your current living expenses and current financial obligations to make its final decision if you can actually "afford" more debt.

Typically, there are three ranges lenders lump you into based on the three C's: good, bad and gray. Their computers make the first cut, with top scores considered good. These customers are automatically approved for their loan.  Gray scores are reviewed on an individual basis and lenders typically will ask applicants questions about certain marks on their report. The bad group is usually history, unless a willing lender bumps him or her up into the gray group to him give or her a chance.

So how do you boost your chances of getting approved?

The No. 1 rule before you apply for a loan or credit is to get a copy of your credit report to check for errors. If you need to dispute any information on your credit report, remember that you have the legal right to insert up to 100 words into your file at the credit agency.

Explain your side of the story. State all the facts -- the names, numbers, dates and places concerning what really happened. Believe it or not, credit grantors will take your statement into consideration when they check your file because the statement says something about your honesty and character (one of the three Cs).

If you've been denied credit for any reason within the past 30 days, you may be able to obtain a free copy of your credit report by contacting any of the following three credit reporting agencies. Otherwise, it can cost up to $9.

• Experian
  There are different addresses available depending on your situation. Call and speak to an operator to determine the proper address for your claim.
  (800) 422-4879
  (888) 397-3742

• Equifax
  Credit Information Services
  P.O. Box 105873
  Atlanta, GA  30348
  (800) 685-1111

• Trans Union Corporation
  PO Box 390
  Springfield, PA  19064-0390
  (800) 888-4213

Once you receive a copy of your credit report, follow these three tips:

Tip No. 1: Pay down the debts you owe. No lender will lend you more money if you can't pay the debts you already have.

Tip No. 2: Reduce the number of cards immediately. One person said she had no balances on her credit cards, never was a day late on her payments, applied for her ninth (!) credit card and was rejected.  Why? Creditors feel that at a moment's notice she could have overextended herself financially.

Tip #3: Pay your bills on time. You'll always remain in the good graces of future creditors if you constantly pay your bills by the time they are due. Some folks pay their bills when they come in; others pay them right before they're due.

Posted: May 21, 1998