Not everything in life can go the way we want. Work, emotional and financial problems can lead to bad credit which leaves people in a complicated situation in life. If you have found yourself in this kind of a job you are probably well aware that you cannot get a personal loan because of your bad credit, you may not even get a mortgage loan. So, should you consider the idea of getting a mortgage loan simply because your credit rating is so low?
No, not at all. There are still some things you can do. Even at your lowest rating point, there is always the possibility that you will be approved for a loan. You mustn’t give up and continuously push to achieve your goals.
However, here we are telling you what kind of changes you can make in your life to improve that rating and increase the chances of reducing that loan.
What is a credit score?
Before you can make any kind of financial adjustment to your lifestyle, you must first understand a few things about this rating and how you lose or earn points. In the US these ratings range from 300, which is the lowest point and 850 is the highest point. The higher your score, the more positive impression banks and lenders have on you.
This helps them to dig through every information on you and analyze your background and past financial situation without asking you for documents that date ten years in the past. The higher the score, the greater the chance that you will get the mortgage you are asking for. But, the score does not just decide whether you will get the loan or not. It also sets the interest rate. Naturally, you want the lowest interest rate possible and to do so, you will have to increase your credit rating.
How can I check my score to get Mortgage Loan?
There are many ways through which you can get a report about your credit. The first and most accurate way to do this is by going to one of the three consumer credit reporting agencies such as Experian, TransUnion and Equifax. Of course, you will have to pay a small fee, but you will get detailed information about your financial history and everything else, you will need to analyze your rating.
If you do not feel like wasting time going to these agencies and paying them money, you can also find one of the many online websites that provide you with reports. Keep in mind, the report will not be as detailed as getting it from a reporting agency, but it can still be useful to you.
How will my rating affect the Mortgage loan?
A bank or a lender goes through their score to decide if they will approve their application and what the interest rate should be. The best interest rates are for those with a score between 750 and 850. If you are below 600, it means that the rates will be higher and your loan application will be less likely to be accepted.
However, there are some lenders out there that are offering mortgages to everyone outside, but at the expense of very high-interest rates. It can be challenging to pay back the loan, but at least you will get money. It is up to you to decide whether it will be worth the risk or not. If you are looking for an experienced mortgage company that offers low rates, check it out.
When is a Score Too Low?
There really isn’t a clear answer to this question, as different lenders have different rules when it comes to lending money. Some people like to work with people with high scores, others with low. Some want to play at low risk and low-interest rates, while others like a high-interest rate but also combined with high risk. So do research and find a company that can meet your needs.
Should you first improve your score or get a mortgage?
This is a question that many people are asking themselves. It is true that you probably need money as soon as possible and not in a few months or years in the future. You have to do the analysis by yourself and come to the conclusion which path you should take.
We recommend considering improving your rating first as it can be changed quite easily, especially when you are in the 500 and 650 range. Take the necessary steps to increase it, and you can save yourself thousands if not thousands of dollars. By increasing the score to just 20 or 30 points, you may cut the interest rate by half, which is a significant improvement.
What can you do to improve it?
Therefore, if you decided that you really want to improve your credit score, then you have to follow some guidelines.
The first and most natural thing to do is to pay all of your bills on time. Sure, it sounds simple enough, but you’d be surprised just how many people are forgetting about their bills. Do not leave any payment behind, and you will see how fast your rating will increase.
The second thing you can do is to repay any pending debt. Of course, everyone has to pay back an entire loan in just one payment for the money, but if you have any awaiting liability that is only a few thousand dollars, you can pay those back. This can bump up your credit score by ten or fifteen points which is something you need.
Another thing you should consider is cancelling a credit card that you are not using. We are not sure why, but having multiple cards and multiple bank accounts may actually lower your rating. You should also consider adding yourself to the electoral register.
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