Home equity loans bad credit
Everything About Credit Reports - USA
There are many loans in the market and everyday some new lucrative deal is being advertised. In these days when every-one is cashing on the equity generated in homes due to the increase in prices of real estate, taking advantage of easy loans for home improvements etc. is everyones dream. But the question always looms large Will I qualify for the loan . In general granting of loan is a subject which is tackled by banks and financial institutions by referring to the credit report of a borrower. Every individual has a credit report .Understanding, what it is And how it effects, is very useful for everyone.
What is a credit report
In USA there are some companies which maintain giant databases about all individuals reporting their credit activities. These companies are known as Credit reporting Agencies (CRA). On payment of certain fees this information can be got from them by any one, in the form of a credit report.
A credit report is a record which lists any credit card account or loans a person has. It also records the way the payments regarding the loans have been made in past and if any action has been taken against a person for not making payments in time.
FICO Credit Scores
FICO stands for Fair Isaac Corporation. This company has developed formulae to calculate credit score that straight-away give the idea about ones credibility to any lender. Out of all credit score models FICO scores are best known and are used by almost all banks in USA. There is another score known as BNI score which is used to study the likelihood of bankruptcy.
The three credit reporting agencies listed earlier also calculate their own credit scores, but the formulae used are however developed for them by FICO. These all differ and are periodically updated. . The FICO Company offers scoring methods for U.S., Canada, and South Africa. For many other countries it offers Global FICO.
Now coming to the formulae of FICO the basis of those are as per the following % age in weights.
• 35% for punctuality of payment in the past
• 30% for capacity used: the ratio of existing revolving debt taken to total available limit of revolving credit that can be taken.
• 15% for length of credit history
• 10% for credit types used. Whether it was installment type, revolving type or consumer finance
• 10% for any credit obtained recently.
Range of scores:
FICO scores usually range between 300 and 900 .660 or above is generally regarded as excellent and with this type of score one can expect to get good loan at a reasonable rate. If the score is less than 620 then it lists as bad history. These scores are updated after monitoring the performance of an individual .If the repayments are more regularly made then the scores can improve. The credit scores of each individual are different for three companies, Lenders consider an average score and decide accordingly.
A Credit report consists:
1. Identity proof: Full name, current and last address, social security number, year of birth, current and past employers. If applicable similar information is also given about the spouse.
2. Credit proof: The details of accounts with banks, retailers, credit-card issuers, utility companies, etc.
3. Public institutions Records: Information about your records in State and county courts, your records on bankruptcy, tax liens, monetary judgments etc.
4. Recent Inquiries: It also contains information about parties that have obtained copies of your credit report in recent past (one year or two years)
To make these reports Companies (known as credit bureaus) collect information from parties that have previously given loans to you, such as a department store that issued you a credit card or a bank that granted you a personal loan. Generally all this information remains on the credit report for 7 years. However if there is bankruptcy then that remains for ten years.
Copy of the credit report:
The copy can be got from any of the above listed companies by writing directly to them or contacting them on phone, the details are already given earlier. Every one is entitled to get one copy every 12 months. The databases of all the companies are different hence the reports are also different. Hence it is always advisable to take reports from all the three and then compare them.
Credit History:
When a loan application is processed all lenders like to see the credit report before taking any decision. Hence it is advisable to have copy months before, applying for loan plus one should be sure of what is written in it. If there is a wrong entry it should be rectified or at-least a mention should be made by the bureau in your credit report. This can easily be managed by writing to the bureau beforehand.
Late payments:
In general the mention of previous late payments in credit reports create problems. Here also the problem arises only if there are more than one or two late payments. The effect of this can be refusal of loan or increasing the interest rate.
Bankruptcies and foreclosures:
If Bankruptcy and foreclosures have been reported in your credit report then this is quite a serious default. These normally stay in your report for 7 to 10 years. Lenders however consider the reasons surrounding bankruptcy like family illness or injury etc. and in case your repayments are reported well after this period then they do consider your application for loan and approve it.
Conclusion:
Credit report is an important document and care should be taken to keep it correct. Every citizen is allowed to take a copy at-least once a year. This should always be taken and one should look for wrong entries. If there is some mistake then this can be rectified by giving in writing .The rectification process may take upto 45 days .Even if one is not taking any loan, these reports should always be checked, as one never knows when the need for a loan may arise .
Other Articles
