We know credit is important and essential to financing. Lenders place a significant weight on past, present and future credit. What do lenders look for when determining creditworthiness? They take the middle credit score from the three credit bureaus they pull from. It’s the number, lenders use to gauge the 3 C’s:
Breaking these down, it makes financial sense why lenders delve into your
personal information to better understand their return on investment (ROI).
Character-Defined by the author, Mohamed Ayed, “May your character preach more loudly
than your words”. Lenders are looking at your credit history to
determine your ability to repay and at the likelihood of default. Questions
they are using may include the following:
- Are your payments made on time?
- How many revolving (credit cards, lines of credit) and installment loans (auto, unsecured personal loans) accounts are in your name and how long have payments been made?
- What is the length of employment at your current job?
- Have you lived at the same address for 2 years?
- How long has your credit file been in existence?
How do you boost your character and credit rating? For starters, get a copy
of your annual credit report for FREE. Click here. You can view your past
and current credit history and begin to fix any items lenders may find
character worthy i.e. late payments and high balances on revolving accounts to name a few.
Download our E-book: $0 Down Payment Home Loans
Capital-Show me the money. The lender reviews assets such as liquid assets: checking, savings,
money market, CD, stocks/bonds and mutual funds. Is there a property that
will secure the loan? The capital reflects the investment you will
contribute to a purchase and contribute to the down payment and closing costs.
Capacity-Lenders review your current employment and income sources. They
are looking to verify you can repay the loan and have set a debt-to-income
ratio factor to determine eligibility. It’s important to understand your
salary and likelihood of future employment, your current debts and expenses
and financial accountability.
E-book: How to Boost Your Score for a Better Interest Rate
What if you need to dispute items on your credit report? All three credit bureaus
have a process of disputing items. Click on each one for the
dispute process, Experian, Equifax, and Transunion.
Talking with a mortgage professional that understands their lender
guidelines, products, and programs can assist you in building and re-building your credit for success and loan approval!