Creditors look at several key indicators when you apply for a credit card or a loan. These indicators are affected by how you manage your credit, and so it is important to always keep them in mind.


Credit scoring is a system used by banks and other lending institutions to determine whether or not you are creditworthy. It is more heavily used when you apply for unsecured credit, including credit cards.

Creditors collect information about you and your credit standing from your credit application and know about your credit standing by referring to a database maintained by
financial institutions about their borrowers and credit cardholders. This information may include your bill-paying history, the number and types of accounts you have, late payments, collection actions, if you have applied for new credit recently, outstanding debt and how long you've had existing accounts. Using a statistical program, creditors compare your information to the credit performance of consumers with similar profiles.

The three Cs of good credit
Client History: How responsible you are in paying bills on time.
Capacity: Your ability to pay back a loan or credit card dues based on your income and financial position.
Collateral: Security for the lender in case you don't pay back the loan or credit card dues. A house, for example, would be used to collateralize a mortgage.

Positively changing your "three Cs" will help improve your credit standing. The first two Cs are very important in developing what is called your "credit score" or "credit rating".