This article will give you a quick rundown of the different factors used to determine whether you will be approved or denied for a line of credit. This can allow you to build a plan of attack to present your best possible financial case when applying for a line of credit.

With underwriting, there are three main factors which come into play. The first factor is your debt to income ratio. With this, the underwriters will look at all of your debts on your credit report and what the minimum monthly payments are. This is listed on the credit report for every credit account you currently have which is open.

Although your housing expenses may not be part of your credit report, they are still of great interest to the underwriters. Although there is no set rule as to a good debt to income ratio, it is commonly recognized that it shouldn’t surpass forty percent of your earnings.

It is also important to be have a good credit score. If your score surpasses 700, most would deem that to be a respectable score.

Your credit score will be harmed by any credit card debts that surpass 50% of you credit limit. It will also be negatively influenced by any other financial troubles, such as insolvency or repossessions, that appear on your credit report.

The length of time you have inhabited your current home and worked at your current employment are important factors as well as they help to establish stability.

Although not as important as your credit history or capacity to pay back, stability is still very important. You are more like to receive a line of credit as your credit risk is thus decreased.

These pointers will help you to understand how a request for a line of credit is analyzed.

Over the past few years, new lending options have cropped up in banks all across the country. These days equity lines, and loans have become common household staples, and consumers have new and creative ways to borrow money, finance their homes, and consolidate their debt.

While it may seem like an easy quick fix, experts warn against automatically turning to equity lines and loans as a way to reduce debt.

What is an Equity Line or Loan? An equity line offers a line of credit based on the equity that you have in your home, with a variable interest rate. An equity loan is basically the same thing, but instead of a line of credit, the consumer is given a lump sum payment with a fixed interest rate attached. Although the interest rates on equity lines are usually lower, in a fluctuating economy, an equity loan with a slightly higher fixed rate may be the safer option.

What can you use an equity line or loan for? Banks advertise these options as a tax deductible way to pay off debt, renovate your home, pay for school, or even make purchases at a much lower interest rate.

Anything you would use a traditional consumer loan to pay for can be done using the equity in your home. Often, equity lines and loans are promoted as a safety net to retirees, who pay higher taxes without the tax deduction a mortgage provides.

Is an equity line or loan right for me? While equity lines and loans do offer lower interest rates, and can be a fast and easy way to pay down debt, experts warn that they should be used with extreme caution. As a consumer, you must determine if you have the discipline that is required for an equity line or loan.

Although the loan will allow you to momentarily solve your debt problems, the debt doesnt disappear. You still need to make monthly payments on your equity line. If in the meantime, you continue to overspend and rack up even more credit card debt, you may find yourself worse off than before. Now you have no equity to tap into; and if you are unable to pay your bills, your home is on the line.

When it comes to debt consolidation, it may be tempting to seek out the quick fix. Equity lines and loans are great options, but they do require hard work and discipline. Use these tools carefully, and knowledgeably, and begin today to reduce your debt.