Credit Rating

By now you should have a good idea of how much you have to spend, right? Well, not completely. When deciding how much a lender will loan you, he will also take into account your credit rating. The lender wants to ensure he will get his money back. The lender also wants to ensure he gets his money back on time and will use your credit payment history to give himself a good indication of the likelihood of you not paying on time or not al all. Good credit history and ratings are critical to getting a loan at the best terms. The lender will decide on whether or not to give you a loan based on your credit history.

It is critical to check your credit rating prior to approaching a lender for a loan. If there are any problems, you should try to resolve them prior to applying for a loan. If there are any issues unresolved, be prepared to respond to any questions the lender may have. A lender will want to ensure you are not a risky creditor.

Ask yourself the following questions to determine if a lender would deem you to be a risky creditor:

• On your current mortgage -- Have you let payments go past due by date without paying?
• Revolving Credit - You should have no payments more than 60 days past due date and very few more than 30 days past due date.
• Installment Credit - You should have no payments more than 60 days past due date and very few more than 30 days past due date.

So how can you check your credit rating?
Firstly, order a credit report for yourself. Fees vary from $2 -$12 although in some states it may be free. The lender will receive the same information as you do so there will be no surprises. Companies that you do business with send on credit information about you electronically weekly, monthly or quarterly to credit reporting agencies to update their systems.

There are basically three major national credit companies given below that you can obtain your credit report from. You may be able to do this by phone. If you do so in writing, be sure to include your name, address, social security number and you may also need to include a copy of your driver's license.

1. Experian
P.O Box 2104
Allen, Texas75013-3742
1-888-397-3742

2. Trans Union
P.O Box 390
Springfield, PA 19064-390
1-800-888-4213

3. Equifax
P.O Box 105873
Atlanta, GA 30348
1-800-685-1111

Credit reporting agencies can even tell if you are paying your taxes on time or if there is a court judgment against you.

What is your FICO score and why is it so important?
The number of most interest to you is the FICO number, which is basically your credit rating. The scale for rating goes from 300 to 800. 300 is the lowest and 800 is a perfect score. Scores higher than 650-660 are considered good however anything below this will need some explanation. If your score is over 700, your can rest assured that you will not be turned down for a loan based on your credit score. If your score is under 600 you will most likely have difficulty in securing financing and, if you do, you will probably be penalized with a higher interest rate than current rates as you are deemed a risk. So, there can be one or many reasons why your crating is so low. Your revolving credit or mortgage payment may be consistently late or you may have defaulted on a car or other loan in the past. You may not have paid off your medical bills on time. Surprisingly enough, if you have obtained very little credit in you life, you may also have a low rating as there is very little history, so the lender must assume the worst case.

Correcting Mistakes on your Credit Report
If your score has been unfairly calculated based on incorrect information or any issue that has already been resolved you will need to bring this to the credit agencies attention. You will need to obtain a letter from the originator such as a store stating the issue has been resolved. In case there was an error on the stores part, you will need to get the store to write a letter of explanation that you can provide to the credit agencies. If the error is with the credit agencies such as an incorrect name, you will have to clear it with them. Following this, your FICO score will need to be recalculated and you can request a credit report to check that the issue has been resolved.