Secrets of Credit Score Part 6

Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders will often allow you to borrow more than 80 percent of the value of your home, and may not require private mortgage insurance. You will likely be able to get a home equity loan or line of credit with an interest rate equal to the prime rate, or even below it. Lenders also may seize upon lower credit scores to increase interest rates, pushing consumers deeper into distress.

Lenders may use that score, in addition to the information on your application and other factors, to determine the loan rate you will receive, the types of loans you may qualify for, and the amount of any loans. Lenders may also look at a credit history to determine what interest rate to charge for a specific person. Lenders used personal opinion to make a decision about an applicant that may have had little bearing on the applicant’s ability to repay debt.

FICO scores provide the best guide to future risk based solely on credit report data. The higher the credit score, the lower the risk. FICO scores, determined by a variety of factors, determine the interest rates banks and other lenders will offer you when you are looking for credit, whether for a home, car, or equity loan. FICO scores range from 300-900, with a higher score being better.

Bankruptcies, judgments, liens, and collections/charge-offs will negatively impact your score, as will late payments. FYI: The severity of the delinquency is determined by the amount, how much time has passed, and the number of times you were late on an account. Banks generally have been reluctant to offer long-term loans to small firms. The SBA guaranteed lending program encourages banks and non-bank lenders to make long-term loans to small firms by reducing their risk and leveraging the funds they have available.

Free credit scores or free FICO scores aren't available though you can get a free copy of your credit report once a year from each of the bureaus (as per the FCRA). You'll have to purchase the score in return of a fee set up by the FTC. Free credit reports requested by phone or mail will be processed within 15 days of receiving your request.

Consumer advocates say they're not so concerned that patients will actually be denied care because of their credit score. What does worry them, though, is that the hospitals may try to use the information they glean to pressure the patient. Consumers can typically keep their credit scores high by maintaining a long history of always paying their bills on time and not having too much debt.

Consumers usually buy their credit scores from the credit bureaus, but when they do they are buying a product called a VantageScore, not the FICO score from Fair Isaac that most lenders use. And some lenders sometimes create their own variation on a FICO score, adding in their own criteria. Consumers have been able to tack other users onto their credit cards and essentially "borrow" their good credit.

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Gurmit loves travelling; he has been over 70 countries. He speaks fluent Cantonese, Polish, Hindi, Punjabi and English. Gurmit is an author, writer, insurance and mortgage expert. He frequently writes on various topics of interest to his readers. Gurmit Singh is a licensed mortgage expert with Dominion Lending Centres Mortgage Villa.

Gurmit Singh, mba
Mortgage Expert
M08009905
Dominion Lending Centres Mortgage Villa (11574)
Email:gurmit@gurmitsingh.ca
Website: http://www.gurmitsingh.ca