Loans What Is a Credit Application? Credit Applications Explained in Less Than 4 Minutes By Jamie Johnson Jamie Johnson Website Jamie Johnson is a sought-after personal finance writer with bylines on prestigious personal finance sites such as Quicken Loans, Credit Karma, and The Balance. Over the past five years, she’s devoted more than 10,000 hours of research and writing to topics like mortgages, loans, and small business lending. learn about our editorial policies Updated on November 3, 2021 Reviewed by Andy Smith Reviewed by Andy Smith Andy Smith is a Certified Financial Planner (CFP), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career. learn about our financial review board In This Article View All In This Article Definition and Examples of a Credit Application How a Credit Application Works Types of Credit Photo: VioletaStoimenova / Getty Images Definition A credit application is a form a borrower fills out to request credit. The form can usually be submitted either online or in person. A credit application is a form a borrower fills out to request credit. The form can usually be submitted either online or in person. The lender issues the form, and the information included in it helps the lender determine whether that borrower is a good candidate for a loan. Your lender will either deny or approve your credit application based on this information. Definition and Examples of a Credit Application A credit application is filled out by a borrower and submitted to a lender to request a loan or other financing. A contractual relationship begins between the borrower and that lender when the lender receives a credit application. The application provides the lender with important information about the borrower. Applicants will typically be asked to include the following information on a credit application: AddressPhone numberSocial Security numberEmployer identification number (EIN) for business loansCredit references The information provided on the credit application will make it easy for the lender to send the customer to collections or pursue legal action if the loan is granted and the borrower defaults on payment. Note Lenders often ask for credit references when a consumer or business applies for a loan. These references help the lender determine whether the borrower has a history of repaying their debts. How a Credit Application Works You’ll start the process of applying for credit or a loan by filling out the credit application and providing all the necessary information. Your lender will then most likely pull your credit report, and it will look at factors like your income and debt-to-income ratio, as well. The exact underwriting requirements will depend on your lender. Underwriting is the process by which the lender determines whether it wants to extend credit. Your lender will use the information provided in the credit application to determine whether you’re a good candidate for a loan. Filling out a credit application is easier than ever thanks to an abundance of online lenders. Technology often makes it possible for borrowers to fill out the application entirely online, and they can find out whether they’re approved within minutes. If you're denied a loan, the lender must send you a letter explaining the reason why. All lenders are required to either provide a specific reason for the rejection or let you know that you have the right to request this information within 60 days. The lender must inform you, as well, if it rejects your application due to the information contained in your credit report. It must give you the name, address, and phone number of the credit reporting agency that supplied the report. Types of Credit Most borrowers apply for two primary types of credit. Each can be a good option depending on your needs and your financial situation. Revolving Credit Revolving credit is an ongoing type of account, like a credit card or a line of credit. You'll receive a lump sum of money when you take out a loan, and you'll make payments until the balance is reduced to zero. You can repeatedly use and pay down the credit line over time with a revolving line of credit. Your lender will set a credit limit when you're approved for a credit card. This is the maximum amount of money you can charge to the card. Your credit card will remain in good standing as long as you stay below the limit and continue making payments. Note It’s easy to let a revolving line of credit spin out of control if you're not careful. If you’re able, always pay more than the minimum balance and make all your payments on time. Installment Credit Installment credit is a close-ended credit account that you repay in monthly installments. You’ll either receive the money upfront or the funds will be applied toward an item you’re purchasing. The account is closed when you’ve finished repaying the installment loan. Mortgages, car loans, student loans, and personal loans are all popular types of installment loans. They appeal to many borrowers because of the predictable payment terms and the option to refinance. Try to improve your credit score as much as possible if you’re considering applying for an installment loan. A good credit score will help you earn the best rates and repayment terms on the loan. Key Takeaways A credit application is a request for a loan or line of credit.The information included in a credit report helps the lender determine whether the borrower is a good candidate for a loan.You can usually fill out a credit application either online or in person.Lenders are required to notify you in writing and provide a reason if they deny your credit application.Revolving credit and installment credit are two primary forms of credit that borrowers can apply for. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Christian Small. "Writing & Reviewing a Credit Application: What You Need To Know." Accessed Oct. 20, 2021. Federal Trade Commission. "Mortgage Discrimination." Accessed Oct. 20, 2021.