How can a bad credit report hinder your chances of gaining credit
Many people have been told that no one is able to get credit when the economy is bad. Then there are those people who are told that anyone can get credit at any time, no matter how bad their credit score is, as long as they know whom to contact. The truth is actually a mix of the two schools of thought. Even though lenders do not mind seeing slightly blemished credit scores – because it helps them make more money – they will also be less inclined to lend money to someone who has always failed to repay their loans in full. Ultimately, there is a lending criteria that they have to satisfy.
Even if you think that you have a decent enough credit score, you will want to be extra certain to ensure your loan application will be considered and approved. You will need to pull all three of your major credit reports in order to make sure that you are able to qualify for a loan. There have been many people who are terribly surprised at the last minute, finding that their credit was not good enough for the lending criteria. Many people think that they are good to go with the loan application process because they passed an initial screening or pre-approval stage. However, it is not until after this initial screening and pre-approval stage that most lenders take a good hard look at your credit report and the details within it.
You could be days away from closing on the home of your dreams and the credit card you failed to pay last month because you were saving money for closing costs, could be enough to cancel the whole deal. This is obviously not something that you want to risk. Within the average loan application process, the credit report is pulled just once. This would be for credit cards, student loans and other kinds of small personal loans. For major purchases, such as a house, your credit score is pulled again right before closing. This ensures that you did not go out to charge the world to your MasterCard, making you unable to make the repayments on the new mortgage.
In addition, someone could be taking loans or credit cards out in your name, without your knowledge and this can affect your ability to meet the lending criteria. When it comes to your credit, you are guilty until proven innocent. This means that it is up to you to keep a careful eye on your credit report. There are many services out there that can be your eyes and ears – twenty four seven. This means that as soon as any unusual activity is detected on your credit report, you are notified. This early notification will allow you to address any dubious transactions straight away so that they will never pop-up and surprise you when you go through a loan application process.
In the mean time, before you have the monitoring service set up, you will need to make sure that you are doing everything possible to check your credit score. You have to go through each credit report and look to make sure that not only are all of the lenders listed, the ones that you have had involvement with, but that they have reported everything correctly. There have been many cases where a credit card company had an error in their credit-reporting department and gave their customers thirty-day late notices, even though all of the payments were made on time. This is something that you will want to watch out for because it is exactly these kinds of late payment listings that can cause your loan application to be declined.
Not only can the credit score affect your entire ability to meet the banks lending criteria, but also you could find yourself paying more money than you should be if you are approved. Lenders give high interest rates to those with bad credit reports, which means that they make extra money off you because they never know if you will fail to pay the loan in full. Basically, the lenders do not feel that they can trust you. Don’t take it personal though; they are simply using your credit score to make this decision.
To make sure that you are ready for the loan application process, even if you do not currently have a need for a loan, you should review your credit reports. You want to do this as far in advance as possible because it can take a few weeks to a few months to fix any errors found. This will allow you the time to get everything squared away before you have to apply for a loan or credit card. And then, once you are done looking through all three of your credit reports with a fine tooth comb, you could consider a monitoring service so that nothing else pops up incorrectly. It may seem like a hassle at first but you will save yourself a lot of time, frustration and money in the long run.