Credit Education 101

 

1. Capacity

Lenders need to evaluate whether you can comfortably manage your credit card payments, lines of credit, or loans. Your past income and employment history are good indicators of your ability to repay outstanding debt. The following may be considered:

Income Amount: Is your income adequate to cover the limit on your new credit card, line of credit or loan amount? Does your income show a pattern of decreasing or declining? Stability: Have your employment and income been consistent? Have you been in the same or a related field

Also, the ratio of your current and any new debt as compared to your before-tax income may be evaluated.

Income Type: Does your income consist of wages, commissions or other? How frequently are you paid? Is your income seasonal? If it’s from a source other than traditional employment, how long will it continue?

 

2. Credit History

Lenders will generally check your credit history through various reporting bureaus such as TransUnion, Equifax and Experian.

Your credit report is a detailed summary of your credit accounts (credit cards, auto loans, mortgages, home equity loans, etc.), balances and credit limits and payment history. • Your credit score (usually between 300 and 850) provides an indication of the level of risk associated with your ability to repay. Generally, the higher the score, the lower the risk and the easier it may be for you to qualify for additional credit.

 

3. Conditions

Lenders may want to know how you plan to use the money and will consider the loan’s purpose. Will it be used for an auto purchase, home improvements, education expenses, debt consolidation or a property purchase? Lenders may also look your bankstatements.

 

 

 

 

 

4. Collateral

 

 

 

The loans, lines of credit, or credit cards you apply for may be secured or unsecured. With any secured credit product (secured credit cards, auto loans, home equity lines/loans, home mortgages, etc.), you pledge something you own as collateral.

Secured credit card: this would be the amount of money you deposit into a collateral savings account.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For example, if you are interested in a home equity product, the fair market value of your home will be evaluated and the total amount owed (the balance on your original mortgage plus any other outstanding debt secured by your home) subtracted from your home’s current value. What’s left is the equity in your home. A percentage of your home’s equity, which is referred to as combined loan-to-value (CLTV), is then determined. Lenders will lend you a portion of your home’s CLTV, depending on where you live and other factors. credit and loans: the collateral needs to be evaluated to appraise its current value.

 

Car Buying and credit

Some lenders will only approve you if you have a prior auto loan in your credit history. The dealer charges you a very high interest rate APR (much higher interest rate than you should have paid), and lies to you about the bank "requiring you" to buy the extended warranty, the credit life insurance, the glass VIN etching, and probably lies to you about your credit score, telling you it's lower than it really is.

Or maybe with your credit so low you were rejected, so the dealer tricked you into a co-sign auto loan but tricked your co-signer into being the borrower with a little sleight of hand during paper signing. Since you know you have bad credit, and are low on self esteem, and you have been turned down by other lenders for bad credit or high debt loads, the dealer's Jedi mind tricks sound believable so you agree to sign up for all this, not knowing the devastation on your financial future.

You become upside down on your bad credit car loan, and deeper into debt, most likely with monthly payments you can't handle. Then you get the dreaded call from the dealer 2 weeks later (he pulled the Spot Delivery Scam on you) and delivers bad news that your auto financing fell through and your payments are going up. Then you find out a few months later from the angry lender of your old trade-in, the dealer did not pay off your trade.

Obtain a car loan with higer FICO scores today.

 

 

                Increase Your credit FICO sores today.

 

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