The Five C's in Credit Evaluation

Individuals and business that want to obtain or request for credit would have to undergo a process of evaluation before given the approval for a loan. The process called credit evaluation can take time and always involves an end, either an approval for a loan or rejection.

Before a potential debtor wants to obtain credit for a loan, he must make evaluations on certain areas. There are five C's involved in credit evaluation. They are: character, credit report, capacity, cash flow, and collateral.

Home Line Of Credit

The character of a potential debtor is an important consideration used by lenders in loan grant. A thorough check of the lifestyle of the potential debtor can be undertaken on the part of the lender during the investigation. Nevertheless, the lender may also have to consider first impression as a criterion.

The Five C's in Credit Evaluation

The character of a person applying for a loan is a big factor to the decision for loan approval. A person with a sound financial objective is likely to be granted a loan quickly and more possibly than an individual who is in bad shape, not just on the financial facet, but also on other aspects.

Credit history is another important factor considered by lenders in their decision to grant and approve loan applications. The credit report is a record of an individual's past borrowing and reimbursing transactions. It also includes information about late payments and bankruptcy.

Credit rating can be a part of the credit history of an individual. It is the rating of credit reputation or creditworthiness of an individual. Businesses also have their own credit ratings. The credit rating and report are significant to businesses in their intention to apply for a business line of credit.

The credit score is also an important scoring system of an individual borrower. The score shows the worthiness of an individual borrower for a credit.

For an individual borrower to earn the nods of several lenders, he has to build his credit history. The credit report is an important record of information to a lender. If the credit report does not contain substantial details of borrowing and repaying transactions, it is unlikely for an individual to be granted with a loan, unless the lender has certain conditions.

A credit report can be tarnished. A credit score can be at its low. When these things happen to your credit background, it is unlikely for you to earn the approval of the lender for a loan. However, if your cash flow is good, there is a possibility for you to be granted a loan.

Lenders may also have to check the liquidity of an individual. This can be done by checking the bank statements of an individual borrower. In the case of businesses, lenders may have to obtain a copy of the audited financial statements.

The financial statements of businesses and bank statements can be utilized to show the capacity of a borrower to settle and repay a line of credit. The capacity of the borrower to pay a loan is determined during credit evaluation and approval.

Meanwhile, the collateral is a common term in credit. A lender seeks for security whenever the borrower defaults the loan payment. If no collateral is presented as security for a loan, it is likely that the lender will give the borrower a high-interest rate loan.

Credit evaluation is a process taken by the lender with the participation of the loan applicant. If you want to undergo this process, it is important to make substantial preparation so you are more likely to obtain a loan quickly and less expensively.

The Five C's in Credit Evaluation

Credit Score

Credit Scores range from 300-900 with the average Canadian having one around the 720 range. Borrowers at the higher end of the scale get better rates, and those at the lower end get the less desirable rates due to their higher lending risk. It is interesting to note that only about 11% of Canadians have a Beacon Score above 800 and nearly no one has a perfect score of 900.

If your Beacon Score is below the magic number of 650, lenders will consider you a "B" client and will view you as someone with serious credit issues.

Home Line Of Credit

If you find yourself in the lower portion, approximately 300-580, you will find that lenders place you in the sub-prime category for lending. This means you will get horrible interest rates and high fees on any loans you take out. If you have bad credit, don't despair. You can fix your credit over time by understanding how the Beacon Score formula works and making sure to improve those areas of your personal financial situation which will also increase your Credit Score.

Credit Score

Here are some areas for you to consider:

Payment History - 35% of your Beacon Score - This is based on your payment history over the last few years. With on-time payments it will rise, and with late payments of even 30 days, it will fall. Any bankruptcy, judgments, or collection accounts are in this area of your Beacon Score.

Current Debt Load - 30% of your Beacon Score - Your current debt load is how much money you currently own and how many different creditors you owe money to. It also takes into consideration how much debt you would have if you maxed out all of your available credit.

Age of Accounts - 15% of your Credit Score - This is a rating based on how long your credit accounts have been open with longer being better. You want to ensure that you have at least 3 credit accounts which have been open for longer than one year for the best score.

Type of Credit - 10% of your Credit Score - Bank loans, credit cards, and revolving debt accounts each impact your Beacon Score in a different way.

Credit Inquiries - 10% of your Credit Score - Each time someone pulls your credit report your Beacon Score will temporarily drop. For this reason you do not want to make a ton of credit applications all at one time or prior to trying to obtain a mortgage.

There are overall three things which can kill your Credit scores like no other. They are: bankruptcy or judgments, payments over 30 days late, and maxing out your credit cards. For the best Beacon Score possible your credit card balances should always be below 50% of your credit line, or 75% at the absolute maximum. Another thing that can negatively affect your credit scores are erroneous entries on your credit report. Make sure you get a copy of your report on a regular basis and contest any entries which are incorrect. By understanding how your Beacon Score is tabulated, you can help your score to improve prior to attempting to obtain a mortgage loan. By doing so, you can ensure that you get the best mortgage loan rate possible.

Credit Score

Home Equity Loan Approval Is Swift

Quick home equity loans are easy to get and qualify for. Whether you are looking to remodel your home, pay off high-interest credit card debt, go on that dream vacation, or send your children to college, a quick home equity loan or line of credit may be the perfect solution.

Don't Rush In

Home Line Of Credit

Before you run out and sign the first offer that comes to you, here are some things to consider so that you can make sure you get a home equity loan right for your needs. Simply stated, home equity financing uses the equity you have in your home (home value minus what's owed) to secure a loan. Because of this added security, lenders typically offer better interest rates than when compared to unsecured loans, auto loans, or other loans backed by collateral that might depreciate over time.

Home Equity Loan Approval Is Swift

With most quick home equity loans, you'll be able to borrow an amount equal to 80% of your equity. For example, if your home is worth 0,000 and you still owe 0,000 then you could probably borrow up to ,000 (80% of ,000). Different than mortgage lending, home equity financing can actually take the form of two different kinds of financing, a loan or a line of credit.

A Home Equity Loan

A home equity loan, which is also known as a second mortgage, is no different than any other type of personal loan. It's simply a fixed amount of money that must be repaid over time in accordance with the terms. In almost all cases, a home equity lender will advance the full amount of your borrowing limit to you once you are approved. Then, you agree to pay a set amount each month that is based on the principal and interest, until the loan is repaid in full.

A Home Equity Line of Credit

In this scenario, you're approved for a revolving credit line up to a certain limit as decided by the lender. This means that you can borrow and then repay only what you need and only when you need it. Whether you write a check, use a "debit card" or request a bank transfer of available funds, you're allowed to obtain money during the open borrowing period. The interest rate generally varies depending on when you borrow the funds and your monthly payments will depend on the charges still outstanding on your line of credit.

A big benefit of home equity loans is that you may be able to deduct the interest paid on loans up to 0,000 if married and filing joint, or ,000 if married and filing separately. Regardless of how you use the home equity loan or line of credit, the interest you pay is generally tax deductible. This simply means that you don't have to use the home equity proceeds for capital improvements.

Home Equity Loan Approval Is Swift

Check Credit Report - Government Mandated Free Credit Report

The ability to check your credit report online has become easier than ever in recent years. The government has mandated free credit report information to be viewable to the average citizen at least once per calendar year. This has proven to be a major asset for many individuals that never truly understood their financial history and how their three digit scores were determined.

With access to their reports more people than ever are finding ways to repair their finances and strive toward solvency. Unfortunately, with the ease of this access some individuals have fallen prey to online scam companies that tout themselves as a reporting agency but really spend their time trying to lure in unsuspecting individuals. These poor unfortunate souls will avail themselves of seemingly solid financial advice or even accept a loan that seems to be in good faith. Then not long after it is accepted the interest rates rise dramatically or a large number of hidden fees are found. The individual that borrowed this money is now in worse shape than ever financially.

Home Line Of Credit

However, on a more fortunate level of business interaction there are also honest companies that specialize in helping an individual discover their rating and scores. These companies often offer free trials on a membership basis. This will allow an individual to view their credit report and get their scores as often as they like during this period for free. If they enjoy the easy access to their information they can simply keep working with the service. If they do not feel the need to continue with them then they may simply cancel their membership subscription before the trial period runs out. These sorts of companies also offer financial advice and occasionally they will negotiate debt settlements and offer consolidation loans as well. Unlike the scam sites these companies are known for their integrity and generally do not have hidden fees or highly variable interest rates. They usually work with a set interest rate and a repayment plan for the loan that is well within reason.

Check Credit Report - Government Mandated Free Credit Report

No matter what the reason an individual might have to search for their rating and scores they will find it much easier to do online. There is no need to spend time in a long bank line or have to deal with snide financial services in person. The entire process of acquiring your information happens online and in the comfort of your own home.

Check Credit Report - Government Mandated Free Credit Report

Finance and Credit, World's Apart #4 - You Don't Need a Realtor to Get a Steal

Many people are looking for a new home to buy in San Diego because the real estate market is perfect for buyers. High foreclosure rates, government aid for first time buyers, low interest rates and desperation has made it a great time to buy and you do not need a realtor to get a steal. The fact is that if you do your homework and are prepared you will be able to get the house you want at a great price. You need to take the time to find the best deal out there whether it is a foreclosure or just someone who needs to sell, and that means going through newspapers, looking on line and in magazines. San Diego is full of great deals right now, you just need to look and find them.

What you need to be aware of is how you are going to finance the house and what you need to get approved on a loan application. Most lenders demand three things, and these can not be addressed in a few days, you need to take months and years to prepare for them. First you need to have money saved up, figure at about 20% of the purchase price to be safe. If you are a first time buyer this is where you can get some help. The government has a program that will give you some money for free to put towards a down payment on a new home. Next you need to make sure you have established income. If your monthly mortgage bill will be ,000 figure that the bank wants you to earn between ,000 and ,000 a month so they know you can afford it easily.

Home Line Of Credit

Finally you need to have a good credit score not only to get approved but so you can save on the monthly payments. This may be the easiest of the three even if you have a low number because you can fix it in weeks with credit repair. Credit repair is a fast and effective way to fix your score and it works great.

Finance and Credit, World's Apart #4 - You Don't Need a Realtor to Get a Steal

By David George

Finance and Credit, World's Apart #4 - You Don't Need a Realtor to Get a Steal