Somebody once said, “There is always a way of knowing your limitations and going beyond it.” It is fundamentally true with respect of credit score. There can be nothing more rewarding during loan borrowing than knowing your credit score. There are many people who are practically unaware of what their credit score is; in fact they don’t even know what it means. This credit scoring system has been used since many years to decide whether a borrower is a credit risk or not. Your credit score is immensely decisive in the acceptance and rejection of your loan application.
What is a credit score?
Credit score is a statistical method to assess the credit worthiness of a prospective borrower. Credit score has all the in depth information about your credit experiences. All information about bill paying history, the accounts you have, and the age of these accounts, late payments, outstanding debts. A statistical method is used to compare credit profiles with borrowers with similar profile. Points are awarded for every factor that promises debt repayment. The total number of points tell how likely it is that you will pay the debt when the payments are due. These points are your credit score which is a three digit number.
Understanding a credit score leads you to the question of how do you get a credit score. Every time you have borrowed credit or used it, you get a score which exhibits how you have managed that credit in the past. The loan lenders rely on a credit scoring system which gives grades. Grades A to D are provided to scores which range from 500 to 620 or above in figures. If your credit grading is either C or D or your credit score ranges from 500 to 535, you are heading in for bad credit loans.
If you have suffered from any previous delayed payments or charge offs – the chances are that your credit report would have its account well embedded in it. Many loan lending companies and banks are wary of people with bad credit score. However, more and more loan lenders have overcome their inhibitions and are offering loans for bad credit score.
Don’t worry, if one day you find that your credit score is bad. Today one-third of the people applying for loans have some kind of credit imperfection in their credit report. Bad credit score is so easy to catch that people get blemished credit score for a reason like not having a permanent residence. Credit score has received new threats like unpaid parking ticket, an ignored traffic fine or even a forgotten library book. This definitely effects the credit reliability of an otherwise good borrower, but it also effects creditor for he might be rejecting a trustworthy borrower.
Credit report is integral to credit score. Submit accurate credit report with your loan application. You can get copies of your credit score through any of the three major credit reporting agencies.
There will general information like your current and previous addresses, your date of birth, telephone numbers, driver’s license numbers, your employer and your spouse’s name. Credit history will have information about your personal accounts. The public records account is better off blank, for a public record implies you have had a problem. It records financial data like bankruptcy, county court judgments, charge offs, defaults. The last section called inquiries includes a list of everyone who has asked for your credit report.
Now, if you have a bad credit score there are way to overcome this situation. The first basic way to start is paying your bills on time. You can ask your lender to move your payment date if you can’t pay on time. Closing accounts won’t help your credit score. However, closing unused accounts would be beneficial because they are seen by creditors as credit risks. Don’t stretch beyond your credit limit; rather try to keep the balance at 50% of the credit limit.
Credit score requires continuous hard work. With bad credit score it is never too late to start. And with a good credit score you have to give in a lot of hard work. Being educated about your credit score is like a boon. Having a good credit score strengthens your position and you can ask for better rates which is your right. Any information is good information. Therefore, knowing your credit score, would lead to where you should go – towards the right loan.
Pre-approved home loans are the way to go now days. Pre-approved home loans mean that no longer do home buyers have to spend hundreds of hours searching for the perfect home only to be turned down by the lending institution. With a pre-approved home loan or pre-qualification letter, a buyer is in an immediately better bargaining position in regards to the seller.
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Sellers are much more interested in showing their homes and negotiating with someone/s who already have a pre-approved home loan. This is because heartbreak works both ways. No longer do seller have to spend hours cleaning and straightening and making arrangements with their real estate agent for showing their home, only to find that the buyer does not have a pre-approved home loan and has been denied a loan by their lenders. In fact, now many sellers will only show their homes to those with pre-approved home loans under their belts. Sellers regard this group as serious buyers rather than weekend lookers.
Both buyers and sellers need to know the difference between pre-qualification and pre-approval. Pre-qualification is an informal agreement between you and your lender. The bank gives their opinion on how much they think they will be able to lend to you based on information that you have provided to them. Your lender will not do any background checks at this point. It relies solely on you portraying an accurate picture of your financial circumstances. Because this is more like a friendly handshake, the lender can decide not to give you the loan if they find out later that you have been less than candid with them.
Pre-approval is for the serious-minded. With a pre-approved home loan, the lender will actually check credit history, employment information, assets and liabilities. The only thing the lender won’t check is the property that you plan to buy. This is because you’re still looking for it. For those who are concerned that they might not qualify for a mortgage, it is highly recommended that they go for pre-approval. A pre-approved home loan takes much of the worry out of looking and keeps one focused on searching for homes within their price range. This still doesn’t mean your loan will be approved since the lending institution will still need to take a look at the home you intend to buy, but the odds are more in your favor than with a simple pre-qualification.
Even one-step more secure than a pre-approved home loan is a loan commitment. Banks and other lenders will not issue a loan without checking out both you and your new home. The bank may run additional financial checks on the buyer plus the home must appraise at or higher than the sales price. The home’s title must also be clear and free of problems. The loan commitment happens only once you’ve found a home. While you’re looking, though, getting a pre-approved home loan will make the process go smoother and save a lot of heartache in the end.