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Applying for Credit

Applying for Credit
Reading Level
     edHelper's suggested reading level:   high interest, readability grades 5 to 7
     Flesch-Kincaid grade level:   5.03

Vocabulary
     challenging words:    creditor, retail, factor, agency, based, rent, account, better, risk, income, record, cash, amount, lend, nearly, establish

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Applying for Credit
By Patti Hutchison 		  
1     Are you a good risk? Creditors will want to know. A creditor is someone who is in the business of lending money. These people make money from the interest they charge you on the loan. Before they lend you money, they want to make sure you are a good risk. This means that you will likely pay the money back. When you want credit, you will have to fill out an application for it. The creditor will make a judgment about your risk level based on the information you give them.
 
2     The first thing creditors will look at is your income. They will want to know how much you make each month. Other sources of income such as stocks, rent that is paid to you, or child support must also be listed on the application. The credit application will also ask you to list all your expenses. These include your rent, car or other loan payments, utilities and other amounts you pay out each month.
 
3     Creditors subtract your expenses from your income. This is the amount of money you will have left to pay back the loan. They figure out whether or not you will have enough to make the payments. This is the biggest factor in deciding if they will give you credit.
 
4     Your age is also a factor in determining your credit risk. You must be at least 18 years old to be responsible for your own debts. Usually, they will not lend money to people younger than that.
 
5     The application will ask you to list your present and past employers. People who have been at a job for a while are considered good risks. You will also list your present address and how long you have lived there. People who move around a lot are not considered good credit risks. You must also tell if you own your own home. This also makes you a better credit risk.

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