10 Things Lenders Look at (Besides Your Credit Score)

When applying for a loan—whether it's a mortgage, personal loan, or business financing—many borrowers assume their credit score is the only factor that matters. While it's important, it's far from the only thing lenders check. Here's what else can make or break your approval.

1. Income and Employment Stability

Lenders want to see steady income. They'll look at:

• Current income level – Higher earnings improve approval odds.
• Employment history – 2+ years at the same job shows stability.
• Type of employment – Full-time work is stronger than gig work.

Tip: Self-employed? Be ready with tax returns and profit/loss statements.

2. Debt-to-Income Ratio (DTI)

DTI compares your monthly debt to your income. A lower ratio shows you're not overextended.

DTI = (Total Monthly Debt Payments / Gross Monthly Income) × 100

Example: Earn $5,000/month and pay $2,000 in debts? Your DTI is 40%.

Tip: Pay down debt before applying to improve your DTI.

3. Payment History

Late payments and defaults can hurt you even if your credit score isn't terrible. Lenders check:

• On-time payments – Punctuality builds trust.
• Delinquencies – Especially anything over 30 days late.
• Bankruptcies or foreclosures – Especially if they're recent.

Tip: Set up automatic payments to stay current.

4. Loan-to-Value Ratio (LTV)

LTV applies to secured loans like mortgages or car loans. It compares the loan amount to the asset's value.

LTV = (Loan Amount / Appraised Value of Asset) × 100

Example: Buying a $200,000 home with a $160,000 loan? LTV is 80%.

Tip: A larger down payment lowers your LTV and helps approval.

5. Cash Reserves and Savings

Lenders like to see financial cushions. They may check:

• Emergency fund – Shows you can handle surprises.
• Liquid assets – Cash or investments you can easily access.
• Retirement savings – Some lenders may consider these too.

Tip: Try to save 3–6 months of living expenses before applying.

6. Collateral (For Secured Loans)

If you're borrowing against something (like a car or home), the lender checks its value and ownership.

• Appraisal – Lenders want to know the asset covers the loan.
• Title check – You must own the asset free and clear.

Tip: Keep insurance on assets used as collateral.

7. Credit Utilization Ratio

This shows how much of your available credit you're using. The lower, the better—ideally under 30%.

Credit Utilization = (Total Credit Card Balances / Total Credit Limits) × 100

Example: $3,000 balance with $10,000 in credit = 30% utilization.

Tip: Pay down your cards to improve approval odds.

8. Recent Credit Inquiries

Too many hard pulls in a short time can make lenders nervous.

Tip: Space out credit applications—wait at least 6 months between them if possible.

9. Loan Purpose

Lenders may care how you'll use the money. Some uses are lower-risk than others:

• Home loan – Primary residence is lower risk than an investment property.
• Business loan – A clear business plan helps.
• Personal loan – Debt consolidation looks better than vacations.

Tip: Be upfront about how you'll use the loan. Some lenders restrict usage.

10. Overall Financial Behavior

Lenders may also check your banking habits. Things they might look at:

• Bank account activity – Overdrafts or low balances are red flags.
• Rent history – Can help if you lack a credit score.
• Tax returns – Especially important for the self-employed.

Tip: Keep your bank account in good shape. Avoid overdrafts and bounced payments.

How to Strengthen Your Loan Application

Lenders look at more than just your credit score. Improve your overall profile to boost your chances:

• Raise your credit score (aim for 670+ if possible).
• Lower your DTI by paying down debt.
• Save for a down payment to lower your LTV.
• Avoid new credit inquiries before applying.
• Keep stable employment and organize your paperwork.

Need help qualifying for a loan? A financial advisor or credit counselor can guide you through the process.