Credit Ratings To Get A Better Mortgage Or Loan
time you want a loan or a mortgage, rent a home, or even get a
coveted promotion, your credit ratings will be closely monitored.
To put is very easy terms, a credit rating is a three-digit number
that shows a person's credit worthiness. This is based on individual
Credit Report Is The History Of Your Life
credit reports is a record of your financial dealings, outstanding
on the Loans bad credit cards, loans taken, bank balance etc.
It would even show how often you pay back loans taken. Plus, a
credit report has information about the social security number
and address. If you have a history of arrests or violations it
would be registered in the credit report. Today credit reports
are more important that ever before. As the risk based pricing
increasing these fix the APR or annual percentage rate of a credit.
Consumer Reporting Agency (CRA) collects this information, from
the credit bureaus. Equifax, Experian and TransUnion are the three
main credit bureaus. These three agencies maintain a huge databank
of many individuals, and the information is made available to
Government agencies, employers, a potential landlord, insurers,
investors or anyone who has a genuine business need. These reports
can be used in case depositions and subpoenas.
some states some of the records there are restrictions placed
on the information and its recording.
Records of arrest, misdemeanor etc., which have to be removed
within seven years,
Bankruptcy records are to be removed within ten years.
Medical information, age, marital status or race can only be given
the last few years there has been an increasing demand to withhold
access to credit ratings. The FCRA (federal Fair Credit Reporting
Act) helps promote accurate reporting along with the right to privacy.
information is also well guarded, so it will difficult for others
to get records of arrests or bankruptcy without a court order.
Keep A Tab On The Credit Report And Know Your Credit Rating
should take a look at your Loans
bad credit report before any major purchase, mortgage, job
change or even before you look for a rented apartment. Remember
that you are entitled to a disclosure copy free, once every twelve
will have to make a request to the three main credit bureaus and
other agencies. However it is better to visit www.annualcreditreport.com,
as they will give you a comprehensive credit report. The three
agencies will only give only specific details of their own findings.
If you need more information ring its toll free line for more
information 1-877-322-8228. You could even complete the Annual
Credit Report Request Form and send it to P.O. Box 105281, Atlanta,
a tab on the credit report to prevent identity theft, and errors.
It also gives you information on medical accounts and companies
who have enquired about pre-approved offers of credit.
it carefully and if there is something amiss or if has false information,
bring it to the notice of the agency immediately. It is their
responsibility to get it corrected.
Credit Rating - The FICO score
is the short form of Fair Isaac Credit Organization. This is one
of the first companies to use credit ratings way back in the 1950s.
Today it is the best-known credit rating system. A person's credit
worthiness is based on his or her FICO score. This is ranges from
300 to 900, a rating of 300 is an extremely high risk, while 900
score indicates the lowest possible risk.
the 3 reporting agencies use the FICO rating, though they may
have different trademark and different versions of the score.
Some of the versions are -
Equifax - Beacon, Beacon 96 and Pinnacle
Trans Union - Empirica, Empirica Auto 95 Precision Score and Precision
Experian- Fair Isaac Risk Score
versions, developed by "Fair Isaac Credit Organization", are different
in some ways and are regularly updated. The credit agencies have
also devised their own scoring method, which could be more accurate
in assigning scores to individual. However these are yet not as
frequently used as the FICO scores.
The FICO scoring Method-
FICO is based on a multiple scorecard design. Each version has
10 or more individual scorecards. Individuals are compared with
similar others, and then graded according to the variables in
a particular repayment risk in that group. Which means that sometimes
borrowers who are good with repayment of loans can have the same
score as a delinquent borrower?
weight age given to each criteria -
35% is based on the past punctuality of payment
30% capacity used. This means the ratio of current revolving debt
that includes credit card balances, etc. to total available revolving
credit or credit limits
15% is based on the length of credit history
10% on the types of credit used
10% on the recent search for credit and/or the amount of credit
rated for credit
are specific points that the FICO score is calculated on. These
are the percentage of the Total credit you are utilizing, the
duration of lines of open credit, types of credit the extent of
credit and the number of delinquent payments. Factors like age
also affect credit ratings.
wide variety of modes are created, based a wide variety of inputs
that segment individuals. Along with weighted contributions, individuals
will receive scores based on the scorecard segment they are categorized
under. Sometimes people find themselves a raise or a drop in rating
without any obvious reason.
credit scores are subject federal regulations, which means these
adhere to the Equal Credit Opportunity Act. This acts strictly
prohibits the creation of models based on race, color, religion,
national origin, sex, or marital status.
Scores That Influence Credit Decisions-
you have a credit rating of 850 or more, credit companies will
vie with each other to offer you credit. You will also get the
lowest possible interest rate and the most favorable down payment
options. With 650 and more things still look good; new lines of
credit will be available with favorable terms of down payment
and interest rates. Those with a bad credit rating that is of
500 or more will be usually refused new lines of credit, and if
credit is given then it comes with high down payments and interest
Credit Can Be Refused Even If You Have A good FICO Rating
If you owe money because of a court judgment, tax lien, etc.
If you have a greater number of consumer finance company credit
Though current income and employment history do not influence
the FICO score, but they are also weighed when you applying for
credit. An unemployed person, for example will not get a home
loan even if he or she has a good FICO score.
To Take If You Get Bad Credit Rating
you are careless about paying back loans, credit cards, mortgages
etc. you will get bad credit rating. There are corrective steps
you could get.
Start paying off promptly! This gives you the strength to negotiate
with collectors and businesses to wipe out any late payments or
collections from a credit report. Get an agreement in writing,
so that there are no legal troubles later.
A federal student loans that is defaulted can be put under the
better tag of loan "rehabilitation" if you can make regular payments.
Bad credit terms may be removed once this process starts.
Being smart and polite works! Pre-campus student loan programs
could remove all negative remarks if you talk to the right people.
And of course politeness and humility gets sympathy!
If you are good customer, you might be able to improve you rating.
Businesses are quite willing to improve rating if you are a potential
Some debt under dispute may have the "statute of limitations."
This means that the law has set a period of time when a creditor
can sue to get back the money. Once this period has run out, the
creditor can no longer take action, and the credit-reporting agency
must delete it from your record. But if you promise to pay back,
after the statue limit would restart the time period again. So
look the tiny prints of all the credit you owe before you promise
to pay anything back. Let the sleeping dog lie!
You are protected by the FCRA. If there are errors you can get
these corrected legally. You'd have to make a written complain,
and then the process of verification, which couldtake about 30
days, would begin. Errors if any must be given by the agencies
to all the concerned.
steps to get a solid credit rating, it could make all the difference
when you want that great house, the fabulous job or even a loan
that fulfill your dreams.
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