Archive for January 2012
The Credit Rating Method – How it Works
The credit rating method used by 90% of lenders is the Fair Isaac Corporation method, commonly referred to as the FICO method. Credit scores using this method range from 300 to 850, with the higher scores being the better scores. FICO reports that the median credit score in America is 723.
FICO scores are determined based on five categories of information contained in your credit reports.
Your Payment Record – 35%
The most important factor in the credit rating method is your payment record. A full 35% of your credit score is based on how well and how timely you make your payments. Included in this category are late pays, collections, charge offs, and bankruptcies. The more current any derogatory information in your file is, the worse lenders view it. Even the worst things that affect your credit get better with age.
Outstanding Debt – 30%
The next biggest factor in the credit rating method, is how much debt you are carrying. Credit card debt is particularly scrutinized because cards are the easiest to get in trouble with. If you have one or two cards that are “maxed out”, your credit scores will probably be much lower. Better to spread your balances over a few cards than to max any of them out. If possible, keep balances on all your cards at 30% of the high limit or less.
Length of Credit History – 15%
The longer you have had credit established, the more favorably you are viewed by lenders. A long credit history gives a lender more information in which to gauge your future actions.
Inquires – 10%
Inquires account for 10% of the credit rating method, and is probably the least understood. Each time you apply for credit, insurance, a rental, or employment, there is a good chance a credit report will be pulled. This is called a hard inquiry, and is recorded in your credit report. Lenders look hard at these inquires, especially if they have occurred in the last six months.
Lenders won’t get too concerned if you have no more than 10 hard inquiries in your credit report, spread out over several months. But if you suddenly have 8 to 10 inquires in a short period of time, they tend to get nervous. The exception to this is when several inquires show up that indicate you are shopping for a particular type of loan, such as an auto loan or a mortgage. It should be obvious that you are only looking for one such loan. Inquires can stay on your credit report for 2 to 3 years.
Lenders often times pull a mini version of your credit report for a promotional offer. These are called a soft inquiry and are not reported. Likewise, when you request a copy of your own credit report, that also is called an inquiry but it does not show on your credit report either.
Different Types of Credit You Have – 10%
A credit file containing a mortgage, auto loan, bank loan, and two or three credit cards tells lenders that you have the capability of managing different kinds of debt. This variety of debt will add to your credit score. If your credit history only shows a few credit cards, even though your payment history was perfect on them, your scores will be less.
Understanding how the credit rating method works should help you manage your credit scores better. With proper management, you could easily be at the median credit score of 723 or better.
Bad Credit – Repair Tips
For bad credit repair, first and foremost, you need to be aware and informed about the legalities involved. If you are informed well, your abilities to repair your credit faster by following the right ways will be more. Several ways are there to repair your bad credit and the one suitable for you depends entirely on your individual condition and situation.
Good credit history is something which you always need whether it’s buying a property or taking a mortgage loan. Also, it improves your chances of getting a loan at lower interest rates. Hence, it is very important in today’s time to repair bad credit in the best way you can. This article discusses some bad credit repair tips.
Firstly, get hold of your credit report to find out what exactly needs to be fixed i.e. deleted. Hence, the goal is to find ways to delete the negative items. Few most common negative items are late payments, collection amounts, charge offs and bankruptcies.
After you know that what is making your report negative, it is about time you should start working on it to delete them. Our bad credit repair tips will help you in this. While reviewing the report one should not forget that there might be some errors in it which might also be making your credit scores negative. The best solution to such problems is disputing the negative items in your credit reports directly with credit bureaus. When credit bureaus receive notification of your credit disputes in writing, they need to respond to it within the given time frame. As per the law, if they fail to do so, they have to delete the negative items from your report.
During the time duration specified by the law, the credit bureau is supposed to contact the original creditor for the verification of the account. In most cases, they are unable to get the account verified and this result in deletion of the mentioned negative items from your credit report. Many people resort to this bad credit repair strategy and are successful in their motive.
Very Bad Credit Loans – Bad Credit Rating Not A Problem
Are you one of those who have a bad credit history and have encountered an urgent need for cash? Do you think no lending institution would lend you cash? Think again!!
A very bad credit loan is for people who because of some mistakes in the past became a victim of the circumstances and made their credit history worse. There are many lenders who might deny a loan to such people. But this should not disappoint the borrowers as there many lenders who are ready who have customized products for people with a very bad credit history.
One can avail the loan from the comfort of ones home or office. So this amounts to no running around. Added to the benefits list is the variety of uses that you can put these loan into. The lender doesn’t mind how you use the loan. It doesn’t matter if you use it for medical bills, car repair, holiday loan, wedding loan or any other expense. So this loan serves to meet any emergency need.
Advantages of an unsecured very bad credit loan:
An unsecured bad credit loan provides the borrowers with an opportunity to improve the credit history. The other advantage is that there is no chance of losing the asset in case of a default.
Key factors to be considered in the loan approval process:
Income source of the individual, actual income, credit history along with any open loan with the individual decide the loan approval of the individual.
Types of very bad credit loans:
The very bad credit loans can be of two types – secured and unsecured loans. In case of a secured bad credit loans collateral needs to be furnished by the borrower. Borrowers can use the equity lying in the assets. For example home equity can be used to borrow money. This helps the borrowers in two ways – firstly they can get a better rate for the loan and secondly they can get a loan of a higher amount. Moreover a bad credit record has little effect on the approval of the loan.
An unsecured loan has advantages of its own. Since an unsecured loan doesn’t involve valuation of the asset the loan processing takes less time. The other advantage of an unsecured loan is that there is no fear of losing the asset. A little higher interest rate might be charged in case of an unsecured loan. Another means that lenders may adopt to make good the unavailability of the security is an extra down payment.
With a very bad credit loan you can borrow