Credit Application: Definition, Questions, Your Legal Rights

What Is a Credit Application?

A credit application is a borrower's formal request to a lender for an extension of credit. Credit applications can be made either orally or in written form, as well as online. Whether it's submitted in person or otherwise, the application must contain all of the information the lender asks for in order to make a decision. Credit applicants also have a right to fair treatment under the law.

Key Takeaways

  • A credit application how potential borrowers request money, or access to it, from lenders.
  • Today, credit applications can often be submitted online and may be approved in only a short period of time.
  • The credit application process is governed by laws intended to protect borrowers from discrimination and other unfair lending practices.

What Questions Are on a Credit Application?

When you apply for credit you will need to answer a list of questions and, in many cases, provide documentation. The lender uses that information to decide how safe or risky it might be to approve your request.

While applications may differ somewhat, depending on the type of loan and the lender, the Consumer Financial Protection Bureau says the following information is likely to be required:

  • Proof of your identity (such as a drivers' license or other official ID)
  • Documentation of any name change, if recent
  • Your Social Security number
  • Your pay stubs for the last 30 days
  • Your W-2 forms for the last two years
  • Your signed federal income tax returns for the last two years
  • Documentation of any other sources of income you have
  • Your two most recent bank statements

If you're applying for a mortgage, you may also be asked to explain where the money for your down payment is coming from and to provide documentation to support that.

You'll save yourself some time and speed up the process if you collect all of this information in advance of applying.

There are also certain questions that lenders normally aren't allowed to ask you. Those include whether you have plans to have or raise children, whether you are receiving alimony, child support or separate maintenance payments (with some exceptions), or for information about your spouse (again with certain exceptions, such as if you're applying jointly).


By law, lenders are not allowed to discriminate against credit applicants on the basis of race, color, religion, national origin, sex (including sexual orientation and gender identity), marital status, age, or whether any of the person’s income comes from public assistance.

Where Credit Reports and Credit Scores Fit In

In addition to the information you provide in your application, lenders will typically request your credit reports from one or more of the major credit bureaus (Equifax, Experian, and TransUnion), along with your credit score. In some cases, your credit score will be tailored to the type of credit involved, such as a credit card, an auto loan, or a home mortgage.

While the information in your application is largely focused on your income and assets (neither of which credit reports include), your credit report tells the lender how well you handle your debts, listing your monthly credit payments for up to the past seven years.

Missed payments will be counted against you, especially if you have more than the occasional one. The lender will also take a close look at your credit utilization ratio. That's the amount you owe at any given time relative to the amount of credit that you have available to you. For example, if you have two credit cards with a combined credit limit of $40,000 and an unpaid balance of $20,000 on the pair of them, your credit utilization ratio is 50%. Generally speaking, lenders like to see a credit utilization ratio of 30% or less.

Because of their importance, it is often worth obtaining your credit reports and credit scores before you apply for credit, so you know where you stand.

You can obtain your credit reports free of charge at least once a year from each of the three bureaus at the website If you find any errors that could be damaging to your credit application, you should dispute them with the credit bureau. It is required by law to investigate the matter and get back to you.

You may also be able to obtain a free credit score from your bank or credit card issuer or from a number of reputable websites. Bear in mind that it might not be the exact same score that the lender is using, though it may not be far off.

What to Do if Your Application Is Rejected

If your application for credit is rejected, you have a right to know why. Typically the lender will send you what's formally known as an adverse action letter explaining the reasons. For example, if your credit score was too low, it must give you your score and the date it was reported.

If you wish to, you can contact the lender and ask it to reconsider, possibly based on new information you can supply. Or, of course, you can simply try a different lender.

An adverse action letter may also be useful in pointing out where your credit is weak, which gives you a chance to work on improving it before you apply again.

Does Applying for Credit Hurt Your Credit Score?

Applying for a lot of credit in a short period of time can hurt your credit score and give lenders the impression that you're in financial trouble and desperate need of cash. The credit scoring models will sometimes ignore a sudden burst of credit applications, however, if it appears that you're doing something sensible, like shopping around for a mortgage.

What Is the Equal Credit Opportunity Act (ECOA)?

The Equal Credit Opportunity Act (ECOA) is a federal law that prohibits lenders from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, and several other factors.

What Can You Do if You Believe You've Been Discriminated Against in Applying for Credit?

If you think you've been discriminated against by a lender, you can file a complaint with the appropriate federal agency (several agencies share responsibility for enforcing the Equal Credit Opportunity Act). The Consumer Financial Protection Bureau would be a good place to start. You can also file a complaint with your state attorney general. In addition, you have the right to sue the lender.

The Bottom Line

Filing a credit application is an important step in obtaining a loan or credit card. The lender may request a lot of information and documentation, so it helps to collect it beforehand. Also know that you have rights under the law against discrimination and other unfair practices.

Article Sources
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  1. Consumer Financial Protection Bureau. "Create a Loan Application Package."

  2. Federal Trade Commission Consumer Advice. "Credit Discrimination."

  3. Experian. "What Is a Good Credit Utilization Rate?"

  4. United States Department of Justice. "The Equal Opportunity Credit Act."

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