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Are you a good credit risk? It is more than just your credit score

Being a good credit risk starts with your credit score but there is so much more that financial institutions use to evaluate your credit worthiness.  And the lower your credit risk the lower your rate will be when you obtain a loan. Following are a few ways you can become an attractive borrower to every lender.
If being a good credit risk starts with your credit score, what is a good score?
Anything less than around 575 is considered a poor score meaning you might not be approved from some lenders.  If your credit score is above 750, that is usually considered an A level score meaning you will receive better rates.  Anything over 800 is an excellent score and you will be considered the best possible credit risk.
What about if you have had a hiccup with credit in the past?
Be open and honest with your lenders and make sure you have documentation to support that negative items on your credit report are cleared up.  This shows your good faith and can go along way with lenders when it comes to being considered credit worthy.  If you are interacting online, use the comments section or a secure email to send your lending any verifications or explanations.
What else makes someone credit worthy?
The next factors that will be important are current income versus current monthly debt obligations.  If your current payments plus food and housing costs are more than you are making, that will hamper your ability to obtain a loan. A good ratio will be anything less than 45% as a general rule of thumb.  It will vary depending upon your income level and how much disposal income one has remaining after paying debts, housing and living expenses.
What else will lenders be reviewing to determine credit worthiness?
One key factor is the level of unsecured debt, things like credit card debt or personal loans, compared to the applicant’s income level.  If someone has over a 30% unsecured debt ratio that could be red flag for many lenders potentially causing a problem for you in getting a loan.  And if your unsecured debt is climbing in recent months, that could be another red flag for lenders.
What about payment history on current accounts?
Yes, that is extremely important.  Late payments will impact not only someone’s credit score but it could also be a factor in the loan decision as some lenders might require that there are no 30 day or later payments in the last 6 months to be approved or receive the best rate.  If you are starting to have slow pays on several accounts that could be something that would make lenders cautious in lending you more money.  Recent late payments give the impression that there are financial issues that need to be addressed.
What are a few positive actions that someone can take to look for attractive to lenders?
Having built up other assets is always helpful. Borrowers with savings accounts, investments or property can have a positive impact on their credit worthiness because of these assets.  Other positive factors include having a long tenure in the same field, not necessarily with the same company.  

Posted: 9/10/2015 with 0 comments

Categories: Credit, Financial, Money Matters

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