Applying
for a Loan? - Start by Ordering Your Credit Report
If you are considering
applying for a loan, ordering a copy of your credit report
may well be the best place to start. Why? Because itÕs also
the first thing a potential creditor will be looking at,
and even if you pay your bills on time, you will want to
ensure that all the information in your credit file is up-to-date
and accurate.
Studies have
shown that many credit files contain inaccuracies that could
affect your credit rating, and even lead to the rejection
of a loan application. ThatÕs why reviewing your credit
report beforehand may be a good idea, giving you time to
dispute any items that may be the result of simple human
error or a technical glitch.
And depending
on whether you are applying for an auto loan, a mortgage
loan, or a loan for business or personal use, different
lenders may apply different standards in rating your credit
worthiness. For this reason, reading your credit report
and understanding how your credit data might be interpreted
may give you a chance to improve your credit worthiness
from the point of view of a lender. If you would like to
get a free copy of your credit report right now, [Image]
click here.
Before you begin
the application process, check your credit report for the
following items:
Clerical Inaccuracies
Sometimes credit
reports contain inaccuracies that are the result of a computer
glitch or a clerical error. These may include payments not
credited, late payments, or data mixed in from a credit
file of someone with a name similar to yours. Ordering your
credit report will quickly show you what the lender will
see--then itÕs up to you to dispute any information that
you consider inaccurate. If you would like to get a free
copy of your credit report right now, click here.
Excess Unused
Credit
To make your
credit more attractive to a potential lender, you may wish
to consider reducing the number of revolving charge accounts
that are listed as active on your credit report. Lenders
will sometimes view too much revolving debt as a negative
when considering a loan application.
In situations
where you have stopped using a credit account, it is often
a good idea to close the account if you donÕt plan to use
it anymore. Make sure your creditor notates the account
Òclosed at consumerÕs requestÓ--otherwise, a prospective
lender might assume the creditor closed the account for
other reasons.
A few credit
cards managed well may improve your chances for a loan--particularly
a mortgage loan, where lenders use stricter qualifying guidelines.
Another rule of thumb is to keep balances on credit cards
around 75% of the available credit limit. Ironically, credit
cards that have lots of room on them may be viewed as potential
debt, while maxed-out cards make you a less desirable credit
risk--both of these situations could compromise your ability
to obtain a loan.
If you would
like to get a free copy of your credit report right now,
click here.
30-day and
60-day Late Payments
Even if your
credit report contains a couple of 30-day late payment entries
that are accurate, many lenders will overlook the occasional
late payment if you explain the situation and your credit
is otherwise good. Try to avoid any payment being 60 days
late however, as this may be a red flag for some lenders--even
if they do grant you the loan, it may come at a higher rate
of interest and with less favorable terms.
The primary
period lenders are interested in on a credit report is the
last two years, so try to maintain on time payments, and
verify that the payments are being credited properly by
checking your credit report regularly. If you would like
to get a free copy of your credit report right now, click
here.
Avoid Unnecessary
Inquiries
Each time a prospective
creditor looks at your credit report, an inquiry notation
is added to your file, and most inquiries stay on your credit
report for up to two years. Inquiries you make yourself,
inquiries made during screening for a pre-approved offer
of credit, or an inquiry that is part of a background check
for employment purposes are not reported to potential credit
grantors.)
It is best to
avoid over-applying for credit and running up excessive
inquiries, for the simple reason that lenders of creditors
may think youÕre trying to get credit due to financial difficulty,
or taking on more debt than you can repay.
Lenders do of
course realize that some inquiries are a result of shopping
around for the best rates on a loan, and so they will often
overlook a block of inquiries within a very recent period.
It may help if you explain the inquiries in the application
process. If you would like to get a free copy of your credit
report right now, click here.
Understanding
how your credit report affects your financial future is
the key to smart credit management. Incorporating a review
of your credit report into your financial planning is also
one of the best ways to make sure you meet your goals--especially
when those goals involve major purchases, and youÕre shopping
for a loan with the most favorable terms possible. So get
a free copy of your credit report right now, by clicking
here.
(c) 2000 iPlace.com.
This article is the copyright of iPlace.com and is reprinted
with their permission. iPlace.com is a registered trademark
of iPlace.com, Inc. All other names are trademarks and/or
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provided by iPlace.com is for informational purposes only
and is not a substitute for professional financial or credit
advice.
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