Handle Your Bad Credit To Get Your Loan Approved
September 13, 2009 by Deborah Colvin
Filed under Bad Credit Loan
It’s very rare to find people who, at some point in their lives, didn’t have credit problems that cause their credit score to fall dramatically. If that’s your situation, but yet you’re itching to realize at least the “homeowner” part of the American dream, then you’d better start reading about credit scores and the such because that’s going to be the factor that will weigh the most of the eventual approval of your mortgage loan application.
Bad credit lenders are all over the place. They compensate for taking on bad credit lenders by charging them high interest rates. So it might be quite a challenge getting a somewhat reasonable offer from one of them. But no matter what, be prepared to hand over a lot of documentation as a way for them to try and assess what kind of risk you represent.
Because the FICO score (developed by Fair Isaac & Company) is the one that pretty much all lenders use, before you go out there and try getting your home loan, it’s good to know what yours is. Once you do, you’ll have a good feel for what to expect from the people you’ll be submitting your loan application to and what your chances of approval are.
There are a variety of scores used by different financial institutions. Credit card companies have their variants, and so do insurance companies and car loan lenders, just to name a few examples. What doesn’t change, though is this: the higher your score, the better you look. In all cases, the higher your score, the more likely your application will be approved and the better terms you will get.
In case you didn’t know it or it slipped out of your mind, you have three credit scores, not one. Because all three credit bureaus work independently, and because there’s no legislation requiring that credit information be reported to all three bureaus, your credit file will vary from one to the other. The only way to get as accurate a snapshot of your credit profile as possible is to order your credit score from each one of them.
Another thing to look out for is errors on your credit report. The figures vary by a wide margin, but the consensus is that a large proportion of credit reports carry errors. When you get your credit report, go over it line by line to spot any errors and/or omissions. Highlight anything you spot and make sure you contact the credit bureau to have it corrected. Followup one month later to check if your report has been updated.
When people have bad credit, they often don’t bother knowing how the credit system works, because they think that they’re not going to need that information. As it turns out, getting to know the basics of the credit scoring system can prove beneficial. You’ll either know what to expect from bad credit finance companies, or you’ll decide to take the time to clean up your credit and apply for a loan when your credit profile looks better. In both cases, you come out ahead because an informed customer is always better off than an uninformed one.
If you’re faced with financial hardship issues, one of your options might be to write a hardship letter to your creditors. For advice on how to write it, visit my personal finance blog where you’ll also find plenty of financial education tips.
