Credit
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Explain
credit scores and how they affect my ability to secure
a loan.
Credit scoring is a statistical means of assessing
how likely a borrower is to pay back a loan. It is
not dependant on income, assets, or any other non-credit
factor. Credit scores range from 375 to 900 points.
Most loan programs require a credit score above 660.
Scores below 660 can cause some problems and scores
below 620 will often create significant problems for
the borrower to secure a loan. Conversely, scores
above 700 usually open the door for a borrower to
be eligible for most any loan program. Credit scoring
is based on payment history, outstanding debt, age
of accounts, whether you have pursued new credit accounts,
and the types of credit accounts in use. Your loan
officer can help you evaluate and understand your
credit report and will use it to determine which loan
program is best for you. |
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Can
I get a loan if I have had a bankruptcy?
Yes. You can get a loan if you have had a bankruptcy.
It generally will have to be 3 years since the discharge
of the bankruptcy. You need to have re-established
credit and have NO late payments since the discharge.
This is somewhat flexible depending on the amount
of down payment, job history and other factors. We
also have options available for borrowers who are
willing to take a higher rate in order to get a loan.
“B” paper loans can often help a borrower
whose credit is damaged, by giving them a loan with
a higher interest rate to reflect the amount of risk
associated with the loan. Your loan officer can help
you with these situations.
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What
can I do if I am young and don’t really have
much established credit?
Having established credit is very helpful when you
are seeking a loan. This helps lenders evaluate your
ability to handle debt and make payments on time.
You can start to establish credit by securing a credit
card, car loan or other type of loan. Then make timely
payments on all your bills. Keep records of payments
for phone and utilities and even rent payments. This
will help to document your credit worthiness. Don’t
make the mistake of thinking that the more credit
cards you have the better your credit will be. One
or two established accounts are better than a lot
of accounts. Too many accounts can be considered too
much of a risk as well because it would be too easy
to put yourself in debt by running up the balances
on your credit cards.
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What
can I do to raise my credit scores?
There are a number of things that can be done to raise
your credit scores.
A. You can payoff or pay down large balances.
B. After paying off balances it may help to close
some accounts. Your loan officer can help you decide
which accounts are better off closed and which ones
you should leave open. As a rule of thumb, an older
account with a good payment history and a low balance
is better than a new account.
C. Often, a phone call or letter of explanation written
to the credit card company, business or to the credit
bureau directly can help explain an unusual circumstance
that caused a late payment on an account. If there
are multiple late payments on an account, sometimes
the only way to repair that credit history is time
and patience coupled with discipline to keep the balance
low and the payments on time. |
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