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What Factors Determine Bad Credit
Author David Schneider | May 23,2007
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ABC Mortgage was a lender that specialized in both traditional and non-traditional mortgage products. They worked with borrowers with a wide variety of credit histories and financial profiles. When qualifying a client's application for a mortgage one of the first things that they look at is the applicant's credit history and FICO score. The information provided by these two items help ABC Mortgage to determine the credit risk that the applicant is, as well as for which mortgage program qualified.
At the beginning of this year, Tom X and Nancy Y both submitted a mortgage application to ABC Mortgage. Both had similar income sources and amounts, and both had the same amount of money available for a down payment. Tom X had a credit rating of 650 and Nancy Y had a credit rating of 680. This small difference meant that Tom X would have to use a bad credit mortgage whereas Nancy Y would qualify for a prime rate mortgage. Your credit rating greatly impacts both your ability to get a mortgage and the interest rate that you are charged. If you want to know what factors determine bad credit, then read on.
Too Many Changes of Address
Your credit report is divided into four sections. Each section contains information about your credit history that influences your credit score. The first section of your credit report contains information about who you are and where you have lived. If you have many addresses under this section of your credit report, lenders may think that you are a credit risk because you don't maintain a steady place of residence. If you move around often because of your job, then you will want to make a note of this on your credit reports by sending a letter to each of the credit reporting agencies. You will also want to tell your lender.
Bankruptcies and Collection Judgments
Under the second section of your credit report you will find information about legal judgments against you, bankruptcies that you have filed for and if you were ever divorced. Having a bankruptcy within the last seven years is going to lower your credit rating and generally classify you as a bad credit risk. Having several debt collection judgments in this section will also negatively affect your credit rating, and most lenders are going to see even a single debt collection judgment as a sign that you are a bad credit risk.
A Bad Payment History
Under the third section of your credit report you will find information about your credit accounts and payment history. Several things in this section can qualify your credit as bad. If you have too many credit accounts with high balances, if you have many credit accounts that are less than six months old, if you miss a payment or make a late payment, then your credit score will go down.
Too Many Credit Inquiries
The last section of your credit report details how many inquiries people have made about your credit report. If you have many recent inquiries, then your credit will go down. If you are trying to improve your credit to qualify for a mortgage try not to apply for a new credit card or personal property loan three to six months prior to applying for the mortgage. This will allow your credit score with enough time to rebound from the inquires.
Get Mortgage Quotes from QuoteMatch.com
Taking control of your credit is important to do if you want to buy your own home. Once you have an idea about what type of credit you have, the types of mortgages that you can apply for should be easier to determine. No matter what mortgage products you are interested in, QuoteMatch.com can help you find a good lender. Go to QuoteMatch.com today and get your no-obligation mortgage quotes. |
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