Tag Archives: Credit Report

What Lenders Look For In Your Loan Application

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Lenders will carefully examine the financial standing of a person who is taking out a mortgage loan, student loan, refinance loan, car loan or some other large type of loan. There are numerous factors that a financial institution will consider before granting a loan application and setting an interest rate for the loan. One’s credit report is extremely important as a person’s credit score will determine if he or she can even qualify for a loan and if so, what the interest rate on the loan will be. However, there are also other factors that will be taken into consideration.

Credit Rating

Fortunately, one does not need a perfect credit rating in order to get a loan at a reasonable interest rate. However, one will need a history of having paid credit bills and other bills on time. A person who has been over 60 days late in paying his or her bills will have a hard time getting a low interest rate loan, as he or she will be perceived as a risk.

Prospective lenders also want to see how many other loans one has taken out and whether or not these have been paid back. In fact, some financial institutions advise people not to take out a home mortgage loan until car loans and student loans have been paid off. If you are already paying off a mortgage loan and one or more other loans, then pay the other loans off first before taking out an additional loan.

Many individuals also do not realize that free credit report checks can also leave a bad mark on their credit. If a person has authorized a lender, employer or some other business or individual to check his or her credit report, this will be noted by the credit agency. Lenders do not like to give low interest loans to individuals whose credit report has been checked numerous times in the recent past. This indicates that a person is either applying for a lot of credit or intending to borrow a lot of money. It is best for one to check his or her own credit report, whenever possible, as this is not noted by the credit agency.

Lenders will also consider how high or low one’s credit limit is. A person with a high credit limit will actually be considered risky by a bank, as the bank will be concerned about one’s ability to spend a large amount of money in a very short amount of time. Before applying for a loan, one will want to close unused credit accounts and/or reduce his or her credit limits. Be sure the credit company notes that this was done at the consumer’s request, as otherwise it can give the impression of having been penalized.

On the other hand, one will not want to eliminate all of his or her credit accounts. A person who has a credit card will want to be judicious and only buy what he or she can actually afford. However, one will want to use his or her credit card on a regular basis, as this will provide one with a record of having made credit purchases and paid them on time. Those who have no credit history often find it just as difficult to get a low interest rate loan as a person with a poor credit history.

Other Factors

While one’s credit score is extremely important, it is not the only factor that is taken into consideration. Banks and other financial institutions will also look for signs of stability or instability in a person’s life. A person who has been employed with the same company for at least a couple of years will have an easier time getting a low interest rate loan than a person who has recently found a job or who has just switched jobs. Living in the same house for an extended period of time is also a sign of stability.

Lenders will also consider what type of employment a person has. Those who are self employed are often seen as a bit of a risk. Self employed individuals often find it difficult to payday loans or large low interest loans. However, such individuals can get low interest rate loans if they are able to show substantial income for the last year or two. Lenders simply want to see that a person not only has stable income in the present but that he or she will also have stable income in the future.

A person who is taking out a mortgage loan will want to save up the money to make a large down payment. The ability to make a sizable down payment on such a loan shows the lender that one has the capability to earn and save money and is thus a responsible borrower. Even a person with less than stellar credit can get a loan at a reasonable rate if he or she can put down a large down payment.

In Summary

A person who is considering applying for loan should first of all consider if now is the right time or not. One’s credit report, job, financial situation and other factors will be considered and will determine if someone can get a loan or not and if so, at what interest rate. An individual should do everything possible to show that he or she is stable, responsible and doing well financially.

Credit Reports and Divorce

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No matter what your life circumstances, you should always have your own credit.  If you’re married, the relationship might end.  It can happen through divorce, whether friendly or unfriendly, or death.  If you don’t have your own credit history, life can be very difficult.

If you don’t have your own credit established and are considering divorce, get to your bank immediately.  This is the best place to start because you have some relationship with the bank even if you have never set foot in the building.  Take the opportunity to open accounts in your own name.  Open both a savings and checking account, and start saving every penny you can.  Your spouse can’t, legitimately, get any information about your account or even the fact it exists.

The next thing you need to do is apply for a credit card in your own name.  Your bank should offer one, and that is probably the best place to start establishing your own credit.  One you have taken care of these two issues, talk to your bank’s financial adviser and get any advice you can.

One thing you need to do is get copies of all your credit reports.  If you don’t know what a credit report is, you need to learn.  There are 3 credit bureaus:  Equifax, Experian, and TransUnion.  Each creates its own credit score, and one bad score can cause problems.  Each has its own way of presenting the information and calculating your credit score. You can obtain a free credit report from them once an year.

If you have already begun the divorce process, or the divorce is final, the problems can be more difficult.  You probably need to consider signing up with a company that lets you look at all three of your credit reports as often as you need to.  You need to keep up with all joint accounts until they are at a zero balance at which time you can remove your name from the account.

If your spouse has been ordered to pay on the accounts, keep a close eye on the status of each one by checking your credit files often.  In the event your spouse is cooperative, simply remove your name from any accounts you can, so the debt no longer appears on your credit report.

It will take some time to separate your credit life from that of your spouse’s.  Take the time to contact each credit reporting agency, and request that a consumer statement be put on the account that explains the fact there has been a divorce, and your spouse has been ordered by the court to pay the debt or debts if that is the case.

If you have debts that are your responsibility, do your best to take care of them.  You may cause your spouse harm by destroying his or her credit, but yours is going to suffer, as well.  It’s really not worth it.  A good credit score will serve you better than sticking it to your spouse.

It takes time but, in the end, if you persevere and do everything you need to do, your credit report will recover, and you will have your life back.

Checking All 3 Free Credit Reports Is Vital

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Checking all 3 credit reports from the 3 credit bureaus is important since each credit agency may use different data from different creditors. Some of your creditors may only report your financial data to one credit bureau. So knowing what financial data each credit reporting bureau lists will help you figure out a plan to increase your credit score or retain the good credit you have worked to build. If you are denied credit, you may request a free copy of your credit files from the credit houses by filling out and returning the paperwork included in your loan denial. Or, you can get a free credit report once a year by requesting the information through The Federal Trade Commission’s Fair Credit Reporting Act. Simply visit their website to learn how to get your free reports. Additionally, you can purchase your credit files from the credit houses for a nominal fee by visiting their website. Whichever way you go about it, getting your credit reports and understanding them is essential to your financial well being. Get your credit files and start taking control of your finances today.

Keeping track of your credit reports is an important step in ensuring your financial independence and stability. Knowing what information is kept in your credit files can help you fight back on false claims, dispute items, correct information and can even help keep your identity safe. Reviewing your credit reports at least annually will help you identify any suspicious accounts or inquiries and alert you to potential problems such as financial fraud or identity theft.

Credit lenders, insurance providers, potential employers and landlords often use information provided in credit files to assess your suitability to meet lending, insuring, employing or housing requirements. Information found in files from the 3 credit bureaus most used by inquirers can vary greatly from one report to the next. It is critical you check all three of the major credit bureaus to dispute and inaccuracies, remove old items and get a full picture of your complete credit history and report.

Getting credit reports from 3 credit bureaus will give you a good idea of what kind of credit worthiness you have. Knowing what is on your records gives you the ability to negotiate better terms of lending if your reports reflect timely, full payments. Conversely, if your credit reports reflect untimely or less than payments in full, you need to know which items are holding down your scores the most and work on eliminating them and upping your credit score before you apply for a large loan. Additionally, knowing about delinquent, slow or disputed items on your credit reports can help you set important financial goals to clean up your credit report and get on solid financial footing.

Gaining access to your credit reports is easy. There are many online offers for pulling information from the 3 credit bureaus most used that will give you the information you need. Each report will come with information on how to read the report, what is included in the report, what steps to take if information is incorrect, how to dispute claims and when each item listed on your report is due to expire. In general, most collection or debts are dropped from reports seven years after they appear and bankruptcy will stay on reports for ten years. All open accounts will show on your credit report and will include information like highest balance and average balance and payment history in an easy to read format. Once you see your credit files in black and white, you will start to see how easy it is for lenders, employers, insurers and others to make a judgement on your creditworthiness from your credit reports.

3 Major Credit Bureaus

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In the United States, there are 3 major credit bureaus. There are TransUnion, Equifax, and Experian. These three credit reporting agencies are responsible for amassing information on an individual’s credit history. They collect data from a number of sources called data furbishers.

Data furbishers may be creditors like banks or credit card companies, lenders, utility companies, collection agencies, and courts. Creditors and lenders will give TransUnion, Equifax, and Experian information on how much a consumer has borrowed and on how long it takes them to pay back the loan. Creditors and lenders will give the credit bureaus monthly updates about whether or not the consumer has paid their monthly bill on time. Most of them, however, only tell the bureaus about a late payment if the borrower makes their payment more than 30 days after the due date.

Utility companies usually only notify the 3 credit bureaus if a consumer is seriously in arrears in their billing arrangement. For instance, if they have to place a lien on a property to get an electric or water bill paid, they may notify the bureaus. However, if the consumer is only a month late, they will typically not submit a report. Collection agencies notify the 3 credit bureaus if a consumer owes a bill that has been placed with their office. However, not all collection agencies report all of their debtors. In addition, if a consumer makes a payment arrangement with a collection agency, the agency will usually not provide TransUnion, Equifax, and Experian with monthly updates on the payment arrangement. They will simply notify them when the bill is paid in full or settled for less than the full balance. The courts notify the agencies about public records.

The 3 credit bureaus create reports on each consumer, and they provide these reports to lenders, landlords and some other interested parties. These are what we call credit reports. These parties will look at the consumer’s borrowing and repayment habits. Then, they will determine whether or not they wish to engage in a financial relationship with that consumer. In addition, these parties may also look at the consumer’s credit score. The score is derived from taking data from the credit report and plugging it into a special algorithm. Using their formula, the 3 credit bureaus work to create a credit score for most consumers. However, the credit score that most lenders and creditors look at is not the one created by the credit reporting agencies. It is the one created by FICO (Fair Isaac Corporation). They are an independent organization that creates these scores using information from all of the reporting agencies. You can obtain a free credit report once an year from the 3 bureaus, but you need to pay a fee to obtain your credit score. Whether that’s your credit score from the 3 credit agencies or from FICO, you usually have to pay a small fee.

To ensure that TransUnion, Equifax, and Experian are fair with consumers, they are regulated by two governmental bodies. The Federal Trade Commission provides oversight for the bureaus. The Office of the Comptroller of Currency oversees the entities that provide data to the bureaus, and they try to ensure that the data is correct.

If a consumer wishes to see their credit report, they can contact any one of the 3 credit bureaus. According to the federal law, TransUnion, Equifax, and Experian must all provide consumers with at least one free report per year. In some states, they must provide consumers with a report every time something negative is noted on their report.