Understanding Your Credit.....
R.Scott
It is a fact that you need good credit to buy a home , but don't need perfect credit. When you have a good credit
history, lenders feel more confident that you will be willing and able to pay the new loan. If you don't have good credit
right now, don't be discouraged. A lender may give you a loan, but with a larger downpayment requirement
or at a higher rate of interest. It may be wise to take care of any credit problems you have before you start
looking for a home so you can apply for the best interest rate possible.
The following is a list of the most frequently asked questions about credit.
What is a Credit Bureau and What does it do ?
A credit bureau is a clearing house for credit history information. Credit grantors provide the bureau
with factual information on how their credit customers pay their bills. The bureau assembles this information
, along with public record information into a " file" on each customer. In return , credit grantors can obtain
credit reports about consumers who wish to open accounts with them.
What is my Credit Report ?
Your credit report may contain any of the following information about you:
Identifying information- your name, current and previous address, Social Security Number, employer,
date of birth.
Credit history, your history of paying bills with credit grantors [such as retail stores , banks,finance
companies and mortgage companies}
Public records- items that may affect your credit worthiness, such as tax liens , judgements, bankruptcies, etc.
Inquiries-lists the credit grantors and other authorized parties who have received your credit report.
How Long Do Accounts Remain on my Credit Report ?
In most cases, accounts that contain adverse information may remain for up to seven years from
the date of first delinquency. If the accounts do not contain adverse information, normally the account will report
ten years from the date of last activty.
If I Pay Accounts, will they come off my Credit Report ?
Paid accounts generally remain on file for seven years from the date closed if they contain adverse
information. If the account is paid and does not contain adverse information, the account can remain for up to ten years
from date closed.
How long do public records remain on my credit report ?
In general, civil judgments remain on your credit report for seven years from the date filed. Tax liens
remain on the file for seven years from the date paid. If the tax lien is not paid, it will remain
on the file indefinetely. Chapter 13 bankruptcies remain on file for ten years.
Who makes the decision to give Credit ?
Credit decisions are made by lenders. Each lender has its own formula for evaluating a credit
application, and only the lender can tell you why they made a decision. Many times. the decision does
not have anything to do with your credit report, but instead is based on things such as income, employment or length of
residence
How do I build good Credit History/Credit Score ?
In addition to paying your bills on time, you can take the following steps to maintain your
credit.
Pay loans first, pay off credit card each month, only apply for credit you need, charge
less than the maximum available, try to pay more
than the minimum due each month, use your credit cards to establish good credit
How can I create a Credit History if I don't have one ?
One way to begin is to start small using the following tips:
1 Apply for a credit with a local retailer, such as department stores
2 Make a large down payment on a purchase and negotiate credit payments for the balance.
3 Apply for a small loan at a bank or credit union where you have checking or savings accounts.
4 Keep copies of bills you pay [ phone, rent, gas. insurance etc.] A record that shows at least two years of
regular payments is ideal.
What is a Credit Score ?
A credit score is used to predict how likely an individual is to repay a new loan. There are many different
ways to calculate a credit score. Making payments on time is positive for the score, while charging the
makimum amount available on a credit card is negative. A computer adds the positive and negative points, and the
resulting numbers is a credit score.
Why is a Score Used ?
Creditors and lenders use the credit score because it is a fast, objective way to evaluate a credit.
The lender may take into consideration any special reasons for your past credit problems. Write a
letter of explanation explaining why the problem occured. For example, you were seriously ill, recently
divorced or lost your job. Make a strong effort to reduce your debt and pay your bill on time,
and let your lender know the steps you have taken to improve your credit.
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This Web Site is designed to provide accurate and authoritative information in regard to the subject
matter covered. It is written with the understanding that the author in not engaged here in rendering legal, accounting, or
other professional service. If legal or other expert assistance is required, the services of a competent attorney, accountant
or professional person should be sought.
