Many Americans continue to find themselves in a credit muddle. For a variety of reasons, they can't obtain credit while they try to rebuild a ruined credit rating. Here are some things that lenders look at, and some suggestions for how you can make yourself appear more creditworthy to potential creditors.

What Not to Do

Although many people think that the best way to begin rebuilding credit is to apply for many new credit cards, that practice may actually hurt your chances. The reason is that credit card companies may assume that since you've applied for many cards, you may have been issued a number of them, which could mean a potentially higher debt load in the future. On the other hand, they might look at the fact that many of the cards weren't issued, which could mean the other companies didn't trust you to make your payments. Either way, you lose, so be selective in applying for cards, and space out your requests rather than making a bunch of them in a short time.

Of course, creditors also look at the types of black marks that show up in your credit history. From best to worst, the things that will hurt you most are: payments that were late by 90 days, IRS liens, court judgments, accounts that were turned over to collection agencies, accounts that were charged off as uncollectible, repossessed goods or merchandise, real estate foreclosures, and bankruptcies.

What to Do

Creditors such as banks also look favorably at things like having a savings and/or a checking account with their institution, having a telephone in your own name, whether or not you own your home, and how long you've been at your current address. They're looking for stability before extending credit.

Lenders also calculate your present debt ratio to see if you can take on more debt. They'll generally add up all your monthly bills (not including rent/mortgage or utilities) and divide that number by your gross monthly income. If your ratio is more than 35%, they probably won't extend you credit. You can help lower that figure by consolidating your debts, which will lower your monthly payment and decrease your debt ratio, which will give you a better chance to qualify for credit, even though it won't reduce your actual overall indebtedness.

If you're turned down for credit, you have the right to know why. The law says that creditors must provide specific reasons and the name and address of the credit bureau they used to make their decision. If the reasons your rejection doesn't sound right, obtain a copy of your credit report from the bureau that the creditor used and check it for errors. You have the right to request a free copy of the report that caused you to be rejected. If you find errors, there are ways you can have them changed. Then contact the creditor again and explain the error. You just might be extended credit the next time.

Remember, lenders are in business to make a profit, so they must screen all potential borrowers carefully. However, once you know what they look for, you can make an effort to address those things in order to make yourself appear more creditworthy. Take one step at a time to rebuild poor credit.