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Credit Repair
When applying for a mortgage, credit card or any loan, the first things a lender will ask you is "How is your credit?" It's very important to know and understand why your credit profile is so important to banks and lenders. If your response is I have less than perfect credit, there are still good options available to you. Also you may want to take some steps to improve your credit which will in turn improve your interest rate. The information in your credit report helps lenders decide the level of credit to issue and the interest rate to charge. The better your credit, the more likely you will qualify for the best credit rates. The first step in repairing your credit is to obtain a tri-merge credit report directly from one of the three credit reporting agencies. This credit report will include your credit scores. Since you are pulling your report directly from one of the reporting agencies, your credit score will not be hurt by the pull. The 3 main credit reporting agencies are: Experian, Equifax, and Transunion. The credit scores contained in the credit report is used to determine your risk to the lender. Poor credit is often any credit score less than 600.
What is a credit report?
A credit report is a document that contains records of an individual's credit payment history. Credit Card providers and banks are permitted by law to review your credit report objectively to determine whether to give you an approval. As people pay their bills, most lenders report credit payment information to credit bureaus. Bad credit results from any reported late payments, and any other derogatory reporting such a judgedements, bankruptcies, and foreclosures. Most of the information in your consumer credit report comes directly from the companies you do business with. Each mortgage loan lender has their own underwriting guidelines that they follow. In general, most credit approvals are based heavily on your credit risk score.
What is a credit risk score?
Generally speaking, a credit score measures the likelihood you'll repay a debt, and it is based on information in your credit report. A credit risk score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the FICO score. This is a mathematical processes used to calculate the score by assigning numerical values to various information in the credit report. Credit bureaus provide credit scores to mortgage lenders to objectively evaluate an applicant's credit worthiness. The three main credit bureaus include: Experian, Equifax, and Transunion. The score itself is relative and is viewed differently by various mortgage lenders and banks depending on numerous factors, including the creditor's risk levels, the lenders strategic goals, and mortgage underwriting guidelines. Your risk score will change over time as your credit history develops. Scores range from 375- 850. The higher the score the better the credit rating. Usually any credit score under 600 is considered bad credit.
Credit Reporting Agencies
Equifax Information Services P.O. Box 740241 Atlanta, GA 30374-0241 800-378-2732 http://www.Equifax.com
Experian 955 American Lane Schaumburg, IL 60173 847 517 5600 888-EXPERIAN http://www.Experian.com
Trans Union Corporation P.O. Box 390 Springfield, PA 19064-0390 800-916-8800 http://www.Transunion.com
How to improve your credit
Correct blatant mistakes. Your credit score is only as good as what shows in your credit report. Review your credit report from all three credit bureaus for accuracy at least once a year as well as several months before applying for a loan. It is best to order this report directly through the credit reporting agencies. Equifax.com for example can provide you with a tri-merge credit report. If errors appear on your report generally you must obtain and submit to all three agencies a signed letter from the paricular creditor stating that this item is being reported in error and should be deleted. If Your credit score is lower than 680, you may be in need of credit repair. For More information on credit repair click here.
Pay your bills on time.
This is always a good practice, and it's especially critical that you make prompt payments and also pay down balances close to the time you need a loan. That's because a late or missed payment in the last few months are more likely to lower your score than are isolated late payments several years ago.
Reduce your credit card or revolving debt balances.
A heavily weighted factor in your FICO score is how much money you owe on your credit cards relative to your total credit limit. As a general rule it is good to keep your balances low, at or below 50 percent of your credit limit is best.