credit report - What Does Your Credit Report Say About You

Years ago as a youngster I remember watching an episode of one of my favorite sketch comedies, in this particular episode a woman was about to venture out on a blind date. When her suitor arrived at her door she was pleasantly surprised to find a handsome man glancing back at her. Knowing that he'd successfully made it past the first hurdle judging by her positive areaction, he confidently started to joke with her. He then thoughtfully placed her coat around her shoulders and before the slipping out the door a fax started to arrive. She began to read it, her smile fading by the second. It was a background check on her date. She found out that he'd been married 3 times, relied on all his previous wives for alimony, was up to his ears in debt and served prison time for fraud. She ended the date before it even began. Although only a comedy sketch, it does run along similar lines of a credit report, your next date won't have privy to such intimate details of your financial situation, however, your bank or credit lenders do. Why Is So Much Importance Given to Credit Reports? It gives potential lending institutions a snapshot into your personal financial history. From this they can determine how you handle your current debt, if you pay your bills in a timely manner, how many loans you have and how much you owe. It also reveals if you've had troubles with other lending institutions in the past and if it required the assistance of a collections agency. This can be manifested as a negative mark against you in your report and adversely effect your credit rating. The whole point of the credit report from a lenders perspective is to see if you're a prime candidate to lend money to and the likelihood they're going to get that money back, period. In fact any lending institution will know if they're going to approve you within just 5 minutes of looking at your credit report. Imagine that, a life altering decision in the time it takes to cook an egg. Things that Can Go Against You If you have a sketchy payment history, this can be interpreted as negative from the eyes of the lending institution and be seen as a risk to lend you money. A high debt to income ratio. All they're concerned about is getting back the money they borrowed you with extra interest added on. The more you owe in relation to how much you make is a big concern for lenders as that means you'll struggle to meet your weekly/monthly commitments to them. Debt counseling also shows up on your credit report and raises concerns that you've had difficulty in managing your finances. Try to fix your credit as much as you can on your own. Carefully budget to catch up with lagging payments. If you need credit counseling then only do so as a last resort. How to Beef Up Your Credit You can strengthen your credit simply by disputing charges you're not responsible for and getting those negative marks on your credit report removed, why tolerate blemishes tarnishing your credit score when you don't have to? Write to the credit bureau and challenge any charges (accompanied with proof) you didn't incur. It may take a few attempts but persistency is the key. Create history. Establish a predictable pattern of payment by building a regular payment history. Banks and lending institutions like consistency, it means reliability and shows that you're good at paying your bills. Embrace your credit report. It pays to immerse yourself in your finances at least twice a year, that way you can track your own progress and quickly catch any inconsistencies or errors and correct them. This way you know your financial status and there are no surprises when it comes time to apply for a loan. Annette Miller knows for a fact how frustrating being in debt can be, having formerly been in debt herself she is passionate in helping others break free from theirs and has dedicated a blog covering topics ranging from Debt Consolidation to Budgeting and Finance. http://www.debtreduceinfo.blogspot.com Article Source:http://EzineArticles.com/?expert=Annette_Miller credit report - Mortgage Loan - Credit Report Information Credit Reporting and scoring - History and Tips Your ability to manage credit is an important factor in determining if you will repay your mortgage loan. How does the lender decide if you are a good credit risk? During the loan application process, the lender will obtain a credit report on you and any co-borrowers. Credit reports are provided by credit reporting companies/credit bureaus. They provide information about how you have managed debt, including: ' How much and what types of credit you use, such as credit cards, auto loans, or other consumer loans; ' How long you have had and used credit;and ' How promptly you pay your bills. The three major sources of credit information about consumers are Equifax, Trans Union, and Experian. Lenders will obtain your credit record from all three of these credit bureaus. The lender will evaluate this information to determine whether or not you are likely to repay the mortgage loan in a timely fashion. How does the mortgage lender evaluate the information in the credit report? One way is through credit scoring. What is a credit score? A credit bureau score, is one of many pieces of information that the lender will use when evaluating a mortgage loan application. A credit score is a summary of a borrower's credit report and a numerical measurement that reflects a borrower's management of credit. Your credit score is based on the records compiled by credit bureaus and includes the information reported each month by your creditors, such as the amount of existing credit you have and your payment history. A credit score considers all of the information in the credit report and converts this information into a number that helps the lender determine the likelihood that you will repay your loan on time. 00 is the lowest possible score, 900 is the highest. 680 to 700 is considered excellent, and less than 620 is typically considered sub-rime, though if there are errors on the report, this would be considered. Credit scoring is an objective process, based only on the infor­mation in your credit report. Factors such as age, race, religion, gender, national origin, marital status, your income, employment, and where you live are not considered in determining your credit score. Is credit scoring new? Banks and other lenders have used credit scoring for over 30 years for credit cards and other types of consumer loans, such as automobile and home equity loans. Now, credit scoring is being used in mortgage lending. Why is credit scores used? Lenders want to extend credit to people who will pay them back, and pay them back on time. They also want to be objective in making lending decisions. In order to approve your application for a mortgage loan, your lender must evaluate and understand many different risk factors, including your ability to repay the debt as well as how you have managed credit in the past. Because borrowers' credit histories can range from being very simple to being very complex, it is sometimes difficult to determine whether a given credit history is acceptable or unacceptable, or whether certain information represents a strength or a weakness. By using credit scoring, a lender can quickly and objectively evaluate your credit history in a consistent manner, and determine the likeli­hood that you will repay the loan as agreed. The use of credit scores not only improves the accuracy of the analysis of your credit history, but does so in a way that enhances the efficiency and consistency of the underwriting process. How does a lender get my credit score? When you apply for your mortgage loan, you will give your lender permission to check your credit history with the various credit bureaus. More than likely, the lender will obtain your files from the major credit bureaus: Equifax, Trans Union, and Experian. In addi­tion to obtaining a credit report, the lender will also request a credit score. Your score is calculated by the credit bureau -- not your lender -- and is based only on the information contained in each of the credit bureau's files.