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Loans Bad Credit

Managing Credit Ratings To Get A Better Mortgage Or Loan

Every 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.

A Credit Report Is The History Of Your Life

A 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.

The 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.

In some states some of the records there are restrictions placed on the information and its recording.

a. Records of arrest, misdemeanor etc., which have to be removed within seven years,

b. Bankruptcy records are to be removed within ten years.

c. Medical information, age, marital status or race can only be given with consent.

In 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.

The 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

You 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 months.

You will have to make a request to the three main credit bureaus and other agencies. However it is better to visit, 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, GA 3048-5281.

Keep 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.

Study 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.

The Credit Rating - The FICO score

FICO 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.

All 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 -

a. Equifax - Beacon, Beacon 96 and Pinnacle

b. Trans Union - Empirica, Empirica Auto 95 Precision Score and Precision 03

c. Experian- Fair Isaac Risk Score

These 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-

The 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?

The weight age given to each criteria -

a. 35% is based on the past punctuality of payment

b. 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

c. 15% is based on the length of credit history

d. 10% on the types of credit used

e. 10% on the recent search for credit and/or the amount of credit acquired lately

Getting rated for credit

There 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.

A 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.

All 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-

If 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 terms.

Credit Can Be Refused Even If You Have A good FICO Rating

a. If you owe money because of a court judgment, tax lien, etc.

b. If you have a greater number of consumer finance company credit accounts

c. 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.

Steps To Take If You Get Bad Credit Rating

If 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 customer.

. 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.

Take 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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