Many people get stressed at just the sound of a Lender saying the words……..“We need to Check Your Credit”.
A lot of people also say “Credit Doesn’t Matter” ………… until it does…….. and some people find out the hard way when they need a loan……………..and end up getting Turned Down.
In today’s world, when consumers look to purchase a new car, or a high-priced consumer item, or real estate, unless they intend to pay “Cash”, then obtaining financing is necessary.
When financing is necessary, in just about every circumstance, checking the person’s credit will be required.
There’s an old saying…………. “The Better the Credit, the Lower the Interest Rate”.
It’s in every person’s best interest to have good credit.
A person’s Credit History is contained in the following “3” National Credit Bureaus:
- Trans Union
The “Credit Data” and “Credit History” contained in the above “3” National Credit Bureaus comes from information provided by “Creditors” that earlier extended “Credit” to the person, prior Credit Applications submitted by the person to potential Creditors, or from current Creditors that the person is currently indebted to and where they’re currently making “Contractual Payments”.
In addition, even when the person paid off a Financial Obligation years earlier, the Payment History will still be contained in the Credit Bureaus and further will appear on the person’s Credit Report when a potential Creditors pull it.
Additionally, there’s a term that most people are familiar with, it called a “FICO Credit Score”.
FICO is an acronym for Fair Isaac Company, this was the company that initially created the computer Algorithm that performs “Calculations & Risk Analyses” that considers a person’s credit payment history, the length of their Credit History, the Amount of Debt the person owes relative to the Credit Limits for each Creditor, in addition to amount owed relative to the Total Credit Limit of all Creditors.
The Exact manner that a person’s FICO Credit Score is calculated in a Trade Secret of the Fair Isaac Company, as are the Other Credit Score calculations for the “2” Other National Credit Bureaus.
The names of each respective Credit Scores for each Credit Bureau are as follows:
- Experian:…………..Fair Isaac Rick Model V2
- Equifax:…………….Equifax Beacon 5.0
- TransUnion:………TransUnion FICO Rick Score 04
The “3” National Credit Bureaus also contain information from prior Credit Applications regarding Employers and Resident Addresses that a person provided when applying for Credit.
When a potential Creditor Pulls a person’s Credit Report, there are several options available. Some Creditors only pull “1” of the “3” National Credit Bureaus, so in such a case the potential Creditor will only see what’s contained in the persons credit file for that National Credit Bureau.
While the information for many millions of people is very similar, each of the “3” National Credit Bureaus contains some differences.
Real Estate Lender almost always pull a “Tri-Merged Credit Report”, which contains information from all “3” National Credit Bureaus.
Every person should be aware of the Data and Credit Histories contained in all “3” National Credit Bureaus.
There are MANY FREE websites online where people can check their credit and FICO Credit Scores.
In today’s world, it’s important that people be very careful when going online to obtain a copy of their Credit Report……. everyone is encouraged to only deal with reparable and Trustworthy national companies.
Everyone is entitled to a FREE copy of their Credit Report from each of the “3” National Credit Bureaus once a year.
The First Step that everyone should to do is to obtain a copy of their Credit Report.
After a person obtains a copy of their Credit Report from each of the “3” National Credit Bureaus, it’s imperative that a close review of all reported information contained in the Credit Report is confirmed to be true and correct.
Special attention MUST be made to verify that the Payment History for both Active and Closed Accounts are correct, in addition to verifying that there’re no credit accounts reported that don’t belong to the person.
Fraud these days are on the rise, and we all need to protect ourselves at all costs.
All “3” Credit Bureaus have the Option to “Lock a Persons Credit File”, so should an unscrupulous person try to open credit in another person’s name, the Creditor who the Unscrupulous Person is trying to defraud will not be able to obtain ANY credit Information on the Unsuspecting Person and will most likely decline the credit application.
If there are some “Negative Items” that are reported on a person’s Credit Report and are not correct, then the person must immediately contact either the Creditor that is reporting the Incorrect Information or each of the “3” National Credit Bureaus that are reporting the information.
There are many factors that make up a person’s Credit Score, such as, Payment History, Number of Open Accounts, Length of Credit, Credit Limits, and other factors that the Credit Bureaus consider when calculating a person’s Credit Score.
There is some information the Credit Bureaus have released that have Negative Effects when calculating a person’s Credit Score,
The things NOT to do are:
Not paying Creditors on time, which will result in late payments being reported
HIGH use of Credit with a short history of Credit
Carrying large balances on credit cards
Having Open Collection Accounts
Collection Accounts can be very damaging and can take years to drop off (most taking up to “7” years from the date reported to the Credit Bureaus). Collection Accounts should not be ignored, and rather than wait for them to finally drop off a person’s credit Report proactive actions can be taken.
Oftentimes contacting Collection Companies to make an “Agreement” that upon the payment of the outstanding monies owed, the collection account will be removed from the person’s Credit Report.
The amount of your available credit you use is referred to as “Credit Utilization”. Keeping one’s “Credit Utilization below 30% of available credit limits will demonstrate that the person is managing their credit responsibly and not overspending.
With all of the above actions being done, a person’s Credit Score should rise faster than just not doing anything. This will make a person look better when their Credit Report is pulled and having good credit will open many more doors……other than having the doors closed in the person’s face.
Having good credit will lead to better interest rates for car loans, personal loans and of course Real Estate Loans.
We specialize in making Residential, Commercial, Fix & Flip and Probate Hard Money/ Private Equity and Sub-Prime financing to Borrowers who have credit issues, difficulty proving their income or have been turned down by one of the Big Banks.
We would be happy to discuss the Specifics with those that have been turned down by one of the Big Banks to determine if a Sub-Prime Loan would be a good real estate financing option.
We’re a make sense lender, and we put our Borrower’s needs first and we always go the extra mile to get our clients the money they need.
We focus on solutions not problems.
We’re always happy to review any Borrower’s real estate financing situation to determine how a Sub-Prime Loan provided by our company could prove beneficial to our clients.