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. 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.