Three national credit bureaus collect information from creditors and provide reports to lenders. These reports include a summary of a borrower's loans, credit cards, lines of credit and revolving credit accounts, including detailed information on any late payments or other problems with the accounts.
Based on the information collected, each bureau, using an algorithm created by various vendors, also calculates a credit score for the borrower.
[Factors that can impact a credit score:]
Poor Payment History Paying bills late, having bills sent to collection agencies, having foreclosures on home loans, having cars or other purchases repossessed or declaring bankruptcy.
Approaching Your Credit Limit Keeping high balances on a number of credit accounts, especially when the debt is close to the credit limit.
Short Credit History Having credit accounts for a short time or never having had a credit account or loan.
Too Many Credit Applications Having too many recent applications for new accounts or loan.
Too Few Credit Accounts It's better to have a few revolving credit accounts with low balances than 1 or 2 with balances that are close to your credit limit.
Too Many Credit Accounts Having too many credit cards or loans. Generally, experts recommend having no more than 3 or 4 credit cards.
Credit Problems Don't Disappear Overnight
Past credit problems, such as late payments, can stay on your credit report for up to 7 years from the date the original payment should have been made. Bankruptcies can be reported for up to 10 years.
Lenders do tend to give more weight to the most recent payment information. And no matter what your credit is like now, you can take steps to improve your credit for the future.
About Credit Scores
Credit scores are numeric values that rank the risk of default by an individual according to their credit history at a given point in time. Your score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Mae and Freddie Mac, two of the largest purchasers of home loans from mortgage lenders, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.
Many lenders use credit scores to help evaluate loan applications. A credit score, however, is just one of many factors considered in the underwriting process. Lenders look at the entire picture. Even when a credit score is low, lenders often try to find other factors that could overcome the negative credit issues and satisfy their lending requirements.
Three national credit bureaus (Equifax, Experian and Trans Union) collect credit information and provide reports and credit scores to lenders. Lenders often use a merged credit report, considering the information and scores provided by all three of the credit bureaus.
Different lenders may have different standards for loan approval, based on credit scores and other factors. Because credit bureaus don't currently provide credit scores to consumers, it's important to talk with lenders about how your credit profile fits with their requirements and loan programs.
[Have you checked your credit report?]
Many people who think they have good credit are surprised to find issues in their credit reports.
Sometimes that's because they don't understand how borrowing and bill-paying habits affect their credit rating. And sometimes it's because the credit bureau has outdated or incorrect information, or because another consumer's information is mixed with their reports due to similar names or other errors.
It's a good idea to check your credit report every year or so. It's especially important if you plan to apply for a mortgage or another major loan to do so before you apply, in order to improve your ability to obtain a loan or appropriate terms.
If you find mistakes in your credit report, you can take steps to correct them. And if you find issues you didn't know about, you can learn how to avoid those kinds of issues in the future.
You Have the Right to Receive Your Credit Reports
You have the right to get a copy of your personal credit report at any time.
By law, if you have been turned down for a loan or credit card within the last 60 days based on the information in a credit report, you are entitled to a free report from the credit bureau(s) that provided the report to the lender. You're also entitled to 1 free report per year if you're on welfare, are unemployed and plan to look for a job within 60 days, or your report is inaccurate because of fraud.
Otherwise, there may be a fee for each report you request (about $8.00; charges may vary by state).
[How to get your credit report:]
There are three national credit bureaus that provide reports to lenders. You need to make a separate request to each of them, usually in writing. Experts advise obtaining your credit report from each bureau, as the information may vary. Some credit grantors do not report to all three credit bureaus.
Contact the numbers or Web sites below for specific instructions:
How Credit Affects Rates
Good Credit = Lower Interest Rates
Lenders use your credit history, along with information on salary, assets and debts, to predict how much risk is involved with the repayment of the loan. This is much like insurance companies using your driving history to predict your risk of having an accident.
[The difference between low and high credit risk:]
If you've had credit problems, there are things you can do to improve your credit. And Mountain National Bank has special loan programs, like our Credit Repair Mortgage, to help you.
Mountain National Bank
Equal Housing Lender
| NOTICE: Mountain National Bank is not responsible for and has no control over the subject matter, content, information,
or graphics of the web sites that have links here. Please contact us with any concerns or comments.
©2013 Mountain National Bank. All rights reserved. Website powered by ProfitStars.