The number one reason why some homeowners have difficulty getting a home loan is because of bad credit. In my company, we called it bad credit home equity loan.
If you have bad credit and is trying to repair it, it helps to understand how credit score is tabulated and the factors going into it.
Credit score or FICO is created by Fair Isaac Corporation. It is a value that is used widely by many lenders to determine the interest rate that you will be charged as the homeowner. The score value range from 300 to 850. The lower your credit score, the higher your interest payment will be. Bad credit loan applicants usually have a score lower than 600.
Your credit score is really like your financial score sheet detailing every major transaction you have with the lenders. So who keep tracks of it? In the united states, it is done by the three major financial institutions namely Transunion, Equifax and Experian.
The factors that they take into consideration when determining your credit score are the amount of money you owed to banks, lenders etc. The length and type of loan. For example, your credit card loan. Your history of whether you have paid your monthly loan or interest on time. The assets under your name. Examples are houses and cars. If you have a job, it also factors in your monthly salary.
Do note that your FICO score may not be accurate from time to time. In fact, according to a recent survey, up to eighty percent of all credit scores are incorrect. I personally think it is not that high but there are cases where a person's credit score is unusually low even when they have a pretty good track record and no outstanding loan owed.
If you think this is happening to you, you can question your credit score with the three major financial institutions I mentioned earlier.
What about for married couples applying for a home loan? It is determined from the person with the most sizable income.
So in general, if you know you are going to apply for a home equity loan and has a bad credit, try to clear your current loans first. This will help to improve your credit rating. Another method you can use is to get a loan consolidation plan. By doing so, you are effectively paying up the previous loans and getting a new loan, therefore usually your credit score will increase.
Content Provider: http://www.my-articles.com
More About KB Lim: KB Lim works in a finance company specialising in home equity loan. Visit his site to get more information on Bad Credit Home Equity Loan |
