Lenders take varying degrees of risk when extending loans to borrowers, since there is always the possibility that he or she will default on the loan, i.e. miss the payments or simply run away from the responsibility of paying it back. Even when a loan is secured against a purchase, such as a home mortgage, and they are allowed to take the house in lieu of payment, they still have to find a new buyer to recoup their loss. In worst cases, when the loan is unsecured, lenders risk losing the entire amount of the loan, or have to go through the tedious and sometimes expensive process of going through a long collections process, which may or may not recover all of their money.
For these reasons, all but the most unscrupulous lenders are looking to minimize their risk when evaluating a potential borrower. A lender is looking for a borrower who gives every indication that he can repay the loan. So, as a borrower, you want to appear trustworthy and financially prepared to repay your loan in a timely manner.
One of the main ways you can establish a lenders confidence is to present them with a strong credit history. Your credit history doesnt need to show large credit...
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