When you apply for credit with a bank or any type of lender, they will want to know a lot about you and your financial situation.  A loan specialist will pull your credit report for one, two or possibly all three reporting agencies (Equifax, TransUnion and Experian).  He'll analyze your credit scores, payment history and any negative marks on your report such as judgments, collections, delinquencies, etc.  But one thing you might not realize is lenders will also ask for copies of your most recent bank statements.

Why Bank Statements?

Obtaining copies of your bank statements accomplishes three things for the lender.  First, he is able to verify your accounts, home or business address and even payments on certain loans that might be handled through your bank.  Second, the lender can observe your checking account spending habits.  Third, he can know whether or not you have any money saved in your savings account - such as a nest egg for a rainy day.  Most lenders require at least the previous two months' statements, but some may ask for three.

Personal and Business

If you own a business, the lender will likely want copies of both your personal and business bank account statements.  This is because additional verification of business spending and ongoing dependable income is necessary to approve a loan.  Your bank statement says a lot about who you are and how you operate your business, pay out for expenses, and control incoming funds.  If you operate without a business checking account, you should create some sort of statement showing profits/expenses for several months - similar to tax returns but simplified and itemized.  This will demonstrate to the lender that you are in control of what goes on in your day-to-day business operations.

Prepare for Two Months

If you plan to apply for a home loan within the next few months, be mindful of how you spend from your checking accounts for at least two months before you apply.  Avoid making numerous small purchases and make sure your purchases are meaningful (not splurging).  Remember, debit card purchases will reveal where the money was spent on your statement whereas written checks usually only show up as a "check number" on your statement with an amount out to the side.  So if you go on a shopping splurge that month and visit numerous restaurants, mall stores, etc., then the lender might perceive you as being an impulse shopper or financially irresponsible.  Although it's not really their business concerning your personal spending habits, they do want to make sure you are careful with your spending.  This may increase confidence to approve you for a loan, especially if you have less than perfect credit.

So if you want to go on a shopping splurge a month or two before applying for a loan, try spending cash only!  Leave your bank account only for necessary purchases or bill payments so your life and personal spending won't become an open book to lenders.