At times your application may not be rejected altogether but you may have to settle for a loan amount lower than what you desired or expected. The other terms and conditions of the loan might also not have proved worthwhile for you. All these could have been avoided had you been a little more careful and vigilant while placing your documents about your personal finances as reflected by records of your earnings, monthly expenses and debts. Among these documents the credit report is of prime importance which reveals your credit score. Read about how to fix credit reports.
While considering your application the lender will also get to analyze your credit report. This provides all details about your financial history, payment records, total debts and bankruptcies (if any). This information is used to work out your credit score or FICO score (a rating of Fair Isaac and Company). This is a composite number-a numerical rating of your creditworthiness. These scores may range from 300-900. However, most people’s score fall between 600 and 700. Higher credit scores make you more appealing to the lender. Thus, you will be more likely to be offered better rates and loan terms.
A number of factors can affect the credit score. They can be broadly classified as:
a) The length of time you have had credit, outstanding credit, methods to repay this and how close you are to your credit limits.
b) Problems with credit which you may be having like late payments and bankruptcies. The number and frequencies of your delinquencies is to be considered.
It may be noted that almost 80% of credit reports contain errors. Getting for yourself a copy of the report beforehand will enable you to take steps for improving your score.You will be availed of the opportunity to review the report and rectify the score to quite an extent.
Some steps which can be taken in this regard are:
a) Finding out credit cards which are not needed anymore and closing the corresponding credit accounts.
b) Settling outstanding accounts, if any.
c) Paying out your bills, debt payments on time and in full and reduce your outstanding credit.
d) Verifying all listed account numbers and getting assured that they are yours.
It may be noted that minor credit problems or problems cropping up due to illnesses or temporary loss of income due to some unpredictable occurrence will restrict your chances of getting the aspired loan only from some high-cost lenders. Other lenders will hopefully be considerate enough to overlook such minor problems.
In spite of the best efforts there may still be certain negative indications in the report which could not be done away with. In such case you need to explain the situation to the lender. If at all it cannot be explained then, perhaps, you have to make greater down payments.
Getting to know how credit record affects loan prospects, proceed towards making improvements in your credit report. Your loan prospects will improve, no doubt. It will take you a long way towards securing your desired mortgage loan.
