Unique Factors Assessed by Lenders to Determine Credit Risk

Last Update: September 9, 2021 Loans

Do you know what are the Five C’s of Credit?

Character. Capacity. Capital. Collateral. Conditions.

These metrics analyze your credit score, debt-to-income ratio (DTI), and asset-based – which gauge your ability to repay the loan in the eyes of lenders.

But it doesn’t stop there.

Did you know that lenders often analyze unique – and sometimes random – factors to determine whether or not to approve a loan?

So if you’re in the market for a loan, don’t gloss over these unique factors that could make or break your application.

Unique factors assessed by lenders:

So you checked all of the boxes: Your credit score is rock solid, and you have a reasonable debt-to-income ratio.

Done deal, right?

Not exactly.

Beneath the surface, lenders look at a myriad of unique characteristics before deciding whether to approve a loan application.

How Often You Change Your Phone Number

While seemingly irrelevant, how often you change your phone number is used to assess your overall stability and ability to handle a loan.

If you’ve submitted multiple loan applications over the years – with a different phone number each time – this can be a red flag to a lender, highlighting that you’re not the stable borrower they’re looking for. When it comes down to a 50/50 decision, a small issue like this can tilt the result toward a rejection.

How Often You Move

Just as random as the phone numbers above, how often you move is another indicator of borrowing capacity.

And why is that?

Because lenders want stable and predictable borrowers, those who move a lot give off an impression of instability and spur-of-the-moment decision-making.

If you’re quick to change your mind regarding your living quarters, lenders believe you may take the same approach to debt repayment.

Your Level of Education

As a more reasonable gauge of borrowing capacity, your education helps measure your earning potential, and therefore, your ability to repay debt.

For instance, many young borrowers don’t have an established credit history or a significant asset-base that lenders can use to quantify their creditworthiness. As such, they use your education as a way to extrapolate your employment earnings and come with a financial profile.

Your Undergraduate and Graduate GPA

Serving as a complement to your education level above, lenders are often interested in how well you performed in school.

And why do they care?

Well, the fact is, your GPA is a lot like your credit score.

It shows lenders you are hard-working and take your responsibilities seriously by demonstrating a reliable grade point average. For them, those who have a high education are more likely to fit a reliable borrower’s profile.

Your Marital Status

As the adage goes – two heads are better than one.

So while personal loans are the borrower’s financial responsibility alone, having two sets of income – in the eyes of lenders – can increase your ability to repay debt.

Continuing a theme we’ve mentioned throughout this list, being married also displays a level of commitment and predictability that lenders find appealing. There are plenty of responsibilities that come with being married, and lenders believe you’re more capable of handling a personal loan if you can handle those.

How You Spend Your Money

When analyzing your creditworthiness, there’s a reason lenders look at your credit history and history of financial transactions.

Not only are they concerned with how you repay debt, but they also want to assess how you spend your money. If a lender finds plenty of frivolous spending, this can be a red flag regarding your borrowing capacity.

Even if approved for the loan, your spending habits – along with all other factors on the list – can significantly impact the APR you receive.

Your Employment History

While a full-time job is at the top of many lenders’ checklists, they’re also concerned with your career path. Lenders are attracted to borrowers with predictable earnings, so demonstrating a work history with clear direction and growth makes you more reliable in their eyes.

Conversely, if you change jobs frequently – moving from one industry to the next – this can be a red flag regarding your ability to repay the loan. If you lose your job or receive a significant reduction in hours, lenders believe you may lack the experience or track record to land an identical position.

Your Savings Balance

As another more traditional approach to analyzing credit risk, lenders also look at your savings balance to gauge your financial responsibility.

Having emergency savings or some rainy-day fund shows lenders you’re in control of your personal finances. Moreover, it also provides a safety net for lenders to know you have readily available cash to repay the loan.


While some of the unique factors lenders use to determine credit risk are rather silly in nature, you get a sense of their thought process when deciding whether to approve a loan.

So before you submit your next application, give some serious thought to the issues above. Lenders prioritize stability and predictability above all else, so by convincing them you fit the mold, you’re more likely to receive favorable loan terms.

We understand that some of the metrics above are outside of your control. But small changes can add up quickly and lead you down a path to a better financial future.



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