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"Credit"
is an arrangement for deferred payment of a loan or purchase so a buyer
(borrower) does not have to produce an entire lump sum equal to the
purchase price in order to gain possession of the item purchased. When not
abused, credit is a valuable tool that allows the buyer / borrower the
ability to pay for items over time thus leveraging their current assets
savings.
Credit
is granted by 'Grantors" based upon their belief of the borrowers
ability to make timely payments in an agreed manner. Based upon factors
such as past payment history current income, and current financial
obligations, a Grantor will make a decision whether or not to grant an
applicant credit and the amount of credit to be granted.
A
credit score is one of several pieces of information a lender uses to
decide whether or not you qualify for a loan. If you’ve ever had a car
loan or a credit card, you’ve had a credit score, even if you didn’t
know it. Your credit score helps answer the big question in a lender’s
mind: If I give this person a loan will I get paid back consistently and
on time?
Do
you have any control over your credit score? You bet you do. Your credit
score is a numerical snapshot of your current credit risk picture. When a
potential lender looks at your credit score, several things become clear:
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How
you pay your bills.
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How
much outstanding debt you have.
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How
long you’ve had credit.
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The
types of credit you’ve had. And how many times you’ve applied for
or opened new lines of credit recently.
That
means, like Santa Claus, your lender can see whether you’ve been naughty
or nice to your creditors. If
you’ve got a good track record of paying your bills on time and using
credit conservatively, your credit score will reflect this.
If you’ve had delinquencies and late payments, your credit score
won’t look so good.
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But
no credit score is forever. You can always take these steps to improve
it: Check your credit report every year.
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Correct
any mistakes you find in your credit report. Don’t rely on a
so-called “credit-fixer.” Do it yourself. always pay your
bills on time.
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Keep
your balances low. Do not apply for, and open, multiple credit accounts
in a short period of time.
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Use
credit conservatively. If you handle your credit wisely, over time your
credit risk picture will improve and so will your credit score.
By
the way, don’t get too attached to the actual number your lender uses
for your credit score. Scoring systems use different numeric scales. So it’s
hard to say what a good credit score number is. Let’s just say that a
good credit score is one that helps you get your loan.
One
more thing to remember about credit scores. While lenders can look at the
way you handle your credit, they do not look at your race, your gender,
your religion, where you were born or where you live. With credit scores,
everyone gets a fair shake at getting a loan or a new line of credit.
CLICK
HERE for Your FREE Credit Report
Since
many real estate brokers and lenders may charge you for a credit report
eventually, it may be beneficial to order your own credit report online
prior to speaking to a loan company. By ordering and receiving your
own credit report, you will have a better indication of your credit
situation and possibly your credit scores. If there is false
information on your report, you may begin working with the credit bureaus
to fix the errors- rather than risk getting denied for a loan because of
false information.
Many
consumers opt to purchase credit reports online because:
1-
Having a credit report in front of you may position you in a better place
to negotiate the rate and term you desire.
2-
The money you may save in terms of rate reduction for knowing your credit
and having the ability to negotiate may be hundreds of times more than the
cost of the report.
3-
You might uncover some false information that may be holding your credit
scores down.
Your credit report may be full of dings, compounded with a history of
foreclosure and bankruptcy, but you may still get a loan for home
purchase, refinance, or even cash out of your current home. It doesn't
matter whether you have charge-offs, collections, or tax liens on your
credit report, as long as you can meet the specific guidelines for loan
approval by a multitude of lenders specialized in the credit-damaged
borrower.
The lending industry uses categories to asses the credit risk of any
particular borrower. If the property checks out and you have sufficient
income, impeccable credit and the required down payment you are considered
an `A' borrower. An `A' borrower can walk into almost any lender and get a
mortgage loan. A borrower can fall short in one of these areas and still
be considered an `A' borrower, as long as the other areas can compensate
for the weakness. For example, a borrower that exceeds the required
monthly debt-to-income ratios (28% housing debt and 36% combined debt)
could offer a large down payment. Many lenders will also excuse modest
credit `blemishes' if a reasonable explanation is provided (i.e. job
transition, medical problems). Being 30-60 days late on one credit card
payment is a typical blemish that could be accepted by a lender.
But what about those that have more serious marks against their credit.
Depending on how tarnished your credit history has been, lenders will
typically place borrowers into the following credit categories, which are
qualified by time frames:
A-minus credit: Acceptable blemishes within the last two
years: Charge-offs, or collection accounts, of minor amounts (e.g. less
than $500 in all) are acceptable. Medical bills, including hospitalization
and clinic visits, are usually disregarded by the lender. As for payment
habits, the borrower can have no more than two 30 days late payments, or
one 60 days late payment on revolving or installment credit.
B credit: Acceptable blemishes within the last 18 months:
Up to four 30 days late payments, or up to two 60 late days payments are
allowed on revolving and installment debt. If the credit ding is an
isolated incident, a 90 days late payment is allowed within the last 12
months. Charge-offs, or collection accounts, which are isolated,
insignificant, and less than $1,000 in all, are acceptable. However,
outstanding collection accounts less than four years old must be paid.
Bankruptcy or foreclosure that had been discharged or settled previous to
the 18 month time frame is allowed.
C credit: Acceptable blemishes within the last 12 months:
No more than six 30 days late payments, three 60 days late payments, or
two 90 days late payments are allowed on revolving or installment credit.
Open collections accounts and charge-offs may not exceed $4,000 and must
be paid in full. Bankruptcy or foreclosure that had been discharged or
settled prior to the last 12 months is acceptable.
D credit: A sporadic disregard for timely payment or
credit standing categories the borrower in this class. Open collections
accounts, charge-offs, and judgments must be paid through loan proceeds.
The borrower who had filed bankruptcy and had been discharged prior to the
last six months is acceptable, as much as the ex-homeowner who had his
previous home foreclosed and settled prior to the last six months.
However, mortgage payments cannot be longer than 90 days past due.
The above are general industry guidelines to make lending judgment on the
borrower's loan application. There are no hard-and-fast rules of
separating the borrower on the border line between one credit category and
another. Also, there are compromising variations between one lender to the
next depending on the degree of subjectivity involved in underwriting and
how much each lender wants to commit their funds.
Some lenders have liberalized lending guidelines that blur the dividing
line between A-minus and B credit, by combining the main loan guidelines
into one, and according to some guidelines, 30 days late mortgage payments
within the last 12 months are allowed up to 4 times in a row. This
category of lateness in mortgage payments is normally considered a B
credit, but could be explained well into upgrading the borrower to the
A-minus credit class.
Down payment requirements are being reduced Typical lenders in the market
of credit-damaged borrowers usually lend only up to 80% of the appraised
value of the home, so the borrower often has to have 20% equity or come up
with a 20% down payment for a purchase. This is no longer the case, as
recent months have seen several lenders increase their loans up to 85% of
the home's value for the A-minus borrower, and in one instance up to 90%
for the B-credit borrower. This upward flexibility by several leading
lenders in the credit-damaged market has made it possible for the
once-stricken borrower with modest equity to refinance his/her home, and
the once-dispossessed homeowner to buy a new home with only a 10% down
payment.
What about income? The answer is also positive, as the allowable debt-
to-income ratio has also been stretched to increase borrower purchasing
power. A-minus and B-credit borrowers can often allowed to allocate 50% of
their income to pay for combined monthly debt (compared to the standard
36% guideline used for A credit borrowers), while the bottom rung of the
credit ladder can be stretched to 60%. As for proof of income, some
lenders do have "Stated Income" programs which do not require
tax returns, W-2s, or pay stubs, but may require up to 6-month bank
statements to verify income activity. Such "Stated Income"
programs are now available to the C-credit and D-credit borrowers as well.
Depending on the extent of the blemishes, borrowers with less-than-
perfect credit histories can expect to pay higher than market interest
rates for their home loan. But if getting into a home or refinancing out
of a bind is one's goal, there are plenty of lenders out there among whom
the homebuyer or borrower can get the appropriate financing, and we can
assist borrowers to do just that. If you are having trouble finding a
lender that caters to borrowers with less than perfect credit,
Click
Here to Apply Online at Californiahomebuying.com since we deal
with a multitude of lenders, you may have the right loan for you.
Some credit card specialize is granting
credit to consumers who do not have an established credit history and to
those who may have had some credit problems in the past. By offering
credit to "higher risk" consumers, the companies allow
applicants to begin a new credit history and establish a history of timely
payments. The following links have been included so consumers may
apply to to these companies online 24 hours a day for fast approval.
Consumers seeking to establish credit may apply now by clicking on the
link below:
CreditProvide
- Over 50 Unsecured Credit Card Providers. Bad Credit & Bankruptcy
Welcome. Click Here.
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