How Bad Credit Scores Affect Loan Eligibility
at Thursday, January 29, 2009
Having a poor credit record doesn't necessarily mean that you're going to have to be a renter for the rest of your life. On the other hand, what it does mean is that you're going to have to educate yourself about credit scores and their impact on mortgage loan rates.
You're going to have to be ready to get out there and sift through numerous bad credit lenders to find one that will offer you a reasonable deal. You're also going to have to prepare yourself to hand any prospective lender some serious documentation to sway them in your favor.
Because the FICO score (developed by Fair Isaac & Company) is the one that pretty much all lenders use, before you go out there and try getting your home loan, it's good to know what yours is. Once you do, you'll have a good feel for what to expect from the people you'll be submitting your loan application to and what your chances of approval are.
All financial institutions do not use exactly the same version of the FICO score. Specific examples of this are the credit card, insurance, and auto loan industries which all have their own little variation of the credit score that specifically meets their needs. Yet they all share the characteristic that says that the higher your score, the better a deal you'll be eligible for.
In case you didn't know it or it slipped out of your mind, you have three credit scores, not one. Because all three credit bureaus work independently, and because there's no legislation requiring that credit information be reported to all three bureaus, your credit file will vary from one to the other. The only way to get as accurate a snapshot of your credit profile as possible is to order your credit score from each one of them.
It's common knowledge that a sizable percentage of credit reports contain errors. When you receive yours, most experts recommend that you go through it with a fine-toothed comb in order to make sure that there are no mistakes there that make your file look worse than it really is. Any mistake you find should be signaled to the corresponding credit bureau for correction. Remember to followup (usually within a month's time) to make sure that appropriate action has been taken and that your information is now accurate.
Often times, once people find out that their credit is shot, they pretty much give up on the credit system entirely and don't even bother trying to understand how it works so they can turn things around. The problem with this attitude is that their credit remains bad. But if they had taken the time to educate themselves, they could have made better financial decisions for their future, either by being more savvy when looking for a bad credit loan, or by doing what it takes to improve their credit and be eligible for a standard loan.
You're going to have to be ready to get out there and sift through numerous bad credit lenders to find one that will offer you a reasonable deal. You're also going to have to prepare yourself to hand any prospective lender some serious documentation to sway them in your favor.
Because the FICO score (developed by Fair Isaac & Company) is the one that pretty much all lenders use, before you go out there and try getting your home loan, it's good to know what yours is. Once you do, you'll have a good feel for what to expect from the people you'll be submitting your loan application to and what your chances of approval are.
All financial institutions do not use exactly the same version of the FICO score. Specific examples of this are the credit card, insurance, and auto loan industries which all have their own little variation of the credit score that specifically meets their needs. Yet they all share the characteristic that says that the higher your score, the better a deal you'll be eligible for.
In case you didn't know it or it slipped out of your mind, you have three credit scores, not one. Because all three credit bureaus work independently, and because there's no legislation requiring that credit information be reported to all three bureaus, your credit file will vary from one to the other. The only way to get as accurate a snapshot of your credit profile as possible is to order your credit score from each one of them.
It's common knowledge that a sizable percentage of credit reports contain errors. When you receive yours, most experts recommend that you go through it with a fine-toothed comb in order to make sure that there are no mistakes there that make your file look worse than it really is. Any mistake you find should be signaled to the corresponding credit bureau for correction. Remember to followup (usually within a month's time) to make sure that appropriate action has been taken and that your information is now accurate.
Often times, once people find out that their credit is shot, they pretty much give up on the credit system entirely and don't even bother trying to understand how it works so they can turn things around. The problem with this attitude is that their credit remains bad. But if they had taken the time to educate themselves, they could have made better financial decisions for their future, either by being more savvy when looking for a bad credit loan, or by doing what it takes to improve their credit and be eligible for a standard loan.
About the Author:
If what you need is a specific type of bad credit loan, such as for example to buy a house with bad credit in ATL, please drop by my personal finance blog where you'll find plenty of sensible financial advice..
