Here is some information about how bank credit works, and why knowing your bank credit rating may be very important. Because bank credit focuses on the borrowing capacity of the individual or business entity, the premise is a little different than the extension of a line of credit. First, bank credit has to do with loans that are taken out for specific purposes, rather than general purposes.

Bank credit has to do with the amount of funds that an individual or a business may be able to borrow from one or more lending institutions. Bank credit is very important when trying to start a business, but not every small business can qualify for a bank loan, especially today.

A bank determines whether potential borrowers are creditworthy, that is, whether they meet the bank's credit or lending standards. In making this determination, each bank is in competition with other banks, but without knowing the competitor banks' credit standards. The resulting unique form of competition leads to endogenous credit cycles, periodic "credit crunches". Empirical tests of this repeated bank lending game are constructed based on parameter zing public information about relative bank performance that is at the root of banks' beliefs about rival banks' lending standards. The relative performance of rival banks has predictive power for subsequent lending in the credit card market, where we can identify the main competitors. At the macroeconomic level, the relative bank performance of commercial and industrial loans is an autonomous source of macroeconomic fluctuations. In an asset pricing context, the relative bank performance is a priced risk factor for both banks and non-financial firms. The factor coefficients for non-financial firms are decreasing with size, consistent with smaller firms being more bank dependent.

There are some ways to improve a bank credit rating.
1. First, look at credit card debt and eliminate it if at all possible.
2. Cut down on the number of open credit card accounts. The combined worth of your lines of credit will impact your bank credit rating.
3. Fewer credit cards mean less potential to incur large balances that would hinder repayment of a loan or mortgage.
4. Keep one or two credit cards and pay them off each payment cycle. This maintains a healthy credit record and will reflect favorably on your bank credit and will increase your borrowing power with your local financial institution.