​​When you apply for a credit card, personal loan or any other type of credit, the lender must first decide if you are a good credit risk. Creditors do this by checking your background to see how you’ve paid debts in the past. They check not only your credit history, but also how you’ve paid back non-credit debts, such as rent and medical bills. Many different types of merchants report to credit bureaus and rate the account to reflect your repayment practices. Obviously, a poor repayment history will not fare well with a lender who is considering your application for an extension of credit.

Most lenders use a scoring system to determine whether an applicant is a good credit risk. Applicants receive points for items such as occupation, length of employment and annual income. Applicants also receive points for the number of previous or current creditors who have highly rated their credit payment history. The higher the score, the better credit risk the applicant is considered.

If you are deep in debt and are applying for more credit, the creditor may consider you to be over-extended and can deny your application. Your income-to-debt ratio would be the basis for their rejection because they believe you may not be able to handle additional payments based on your income and existing obligations.

If you have applied with several creditors within a short time, each may have accessed your credit report and their inquiries are recorded in your file. Some creditors automatically reject an application if the credit report shows an excessive number of inquiries. They have found that good credit risks usually do not have many credit inquiries. A record of inquiries will remain on your credit report for as long as two years, and may impair your ability to obtain credit for that period of time.

If you have committed yourself to relatively few creditors and have maintained a high credit rating, lenders may look to how long your credit commitments with those creditors will continue. If you are near the end of your current commitments, the lender may consider extending credit to you because your income-to-debt ratio will even itself out at the maturity of your current commitments.