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When you apply for a loan creditors consider a number of factors in deciding whether to grant credit. The first consideration is your credit history.
What is important to know about credit scoring? How does it work? How can you have control over you credit history?
How does credit scoring work?  ( i )
Banks won't loan you money if your credit is less than perfect. Finance companies may, but at very high interest rates.
You should know:
Bankruptcy and credit derogatory over 3 years with re-established credit, will be most likely considered A+ paper and standard guidelines would apply. Minor credit problems or difficulties stemming from circumstances, such as illness or temporary loss of income, will not limit your loan choices to only high-cost lenders.
What can you do to improve your credit score?
- Improve Your Credit Standing
- Review your credit report for accuracy and completeness before you apply for a loan. Dispute the incorrect information. Dispute the incorrect information.
- Pay all your payments on time.
- Don't apply for any new credit unnecessarily. Every time you sign and return a new credit card offering, an inquiry will be generated and that will reduce your score.
- If you must maintain credit card balances, try to keep them at a level that is 35% - 40% of the maximum credit limit. Consolidating all your credit cards onto one can hurt you in case the balance is at the credit limit.
- If you get into a dispute with a creditor about a small amount, pay it and move on. Having one or more collections, even if they are small amounts, can really hurt your score.
- Reduce Your Monthly Payments
- Pay down outstanding balances (i.e. with a gift of money from your family or you may sell personal assets) and do not take on new debt.
- Try to work out a modified payment plan with your creditors that reduces your payments to a more manageable level. If you have paid promptly in the past, they may be willing to work with you. Do not wait until your account is turned over to a debt collector. At that point, the creditor has given up on you.
- Consolidate Bills into One Low Payment
- A home equity loan or a home equity line of credit will help you pay off your debts at a much lower interest rate, so you can lower significantly your monthly payments.
- Refinance your current mortgage
Refinancing your home allows you to wrap your debts into your mortgage.
- Get a Home Equity loan
Taking out a home equity loan allows you access to the money you need. Although the interest rate may be higher than refinancing, this loan type often is preferred because there is little to no loan origination costs. Like a Home Refinancing, the interest paid on Home Equity loans is tax deductible!
- Get a Home Equity line of credit
The home equity line of credit is similar to the home equity loan. There is little to no loan origination costs, the interest paid on home equity line of credit is considerably low and it is tax deductible. Unlike home equity loans, you are not advanced the entire sum up front, you can access the home equity line of credit to borrow sums whenever you need, that total no more than the amount of the credit limit.
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