Everyone has a credit score calculated at the time your credit report is requested. It’s based on more than 100 different proprietary variables and algorithms developed by Fair Isaac (FICO). The score ranges from 300 to 850. You can obtain your credit score from Equifax Score Power, True Credit or QSpace. Most lenders consider people above 650 to be prime borrowers, meaning they will most likely be approved at favorable rates.
Your Credit History
As part of the loan application process, virtually all lenders will want to see a copy of your credit report. The report will list all your long-term debts (credit cards, mortgage paynments, automobile and student loans, etc.), as well as your payment history. Most lenders will generally require you to pay for a copy of your credit report when they process your loan application.
Most experts agree that it is a good idea to obtain a copy of your credit report several months before you apply for a loan. This way, you have a chance to resolve any problems with your credit before the bank sees the report. U.S. federal law ensures that you have access to your credit report, which may be obtained from your local credit bureau or any of several national firms that specialize in credit reports.
For most people, problems with their credit report are likely related to late payments on a debt. If you were late one month in paying off your credit card, but otherwise have a good payment history, chances are most lenders won’t be too concerned. But if you have a history of late payments, you’ll need to document the reasons. A slow payment history won’t necessarily get you turned down for a loan, but you may have to pay a higher rate of interest or otherwise prove to the lender that you can repay your loan in a timely fashion.
Errors On Your Credit Report
Many people are surprised to learn that credit reports can often contain errors or inaccurate information. If this is the case with your credit report, you’ll need to contact the reporting agency or creditor to have the problem resolved. This can sometimes be a slow process, so make sure you check your credit report early to allow time for mistakes to be corrected.
Bankruptcies and Foreclosures
There’s no getting around it — a bankruptcy on your credit report is not a good thing. But that doesn’t mean you can’t still obtain a loan. Even though a bankruptcy may stay on your credit report for 7 to 10 years, lenders will often consider the circumstances surrounding a bankruptcy (family illness, injury, etc.). Moreover, if you have re-established good credit since the bankruptcy a lender will be more inclined to approve your application.