All About Debts

Credit Scores - Does it matter?

Debt Help If the borrower has a satisfactory credit history and the ability to pay timely payments, the borrower may be considered a prime borrower and rated as an "A" borrower. In this case the loan will be closed using standard mortgage documents referred to as "A paper". If he does not qualify for an "A paper" loan, the borrower may seek financing with companies known as "sub prime lenders".

Moneysupermarket.com expert Steve Willey discusses the credit card options available to people no matter what your credit score may be...

Counseling Debt The mortgage industry has adopted a credit risk scoring method. Credit scores reflect credit patterns over time. Lenders frequently use a scoring system known as FICO scores. FICO is an acronym for Fair Isaac Company, the company that created the original scoring system.

Nevertheless, Have you paid your bills on time Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report. What is your outstanding debt Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.

Consolidation Consumer Debt A credit report is ordered by the lender and the credit reporting agency establishes a score to help a potential lender determine the risk of granting the loan. The scores range from 375 to 900 points, and in general, a score of 650 or above indicates a very good credit history. Average scores fall into the range between 620 and 650. Several factors can have a negative impact on a credit score:

Debt Settlement o History of nonpayment
o Adverse Public record information
o Evidence of collection accounts
o Recent delinquent accounts
o Credit cards charged to their limits
o Too many new accounts

This will make up 15% of your credit score. If you have a history of credit, you make it easier for lenders to establish how reliable your score is. To apply for a debt consolidation loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the debt consolidation loan is for you.

Debt Free A lender will evaluate a credit score based on the following:

Consolidation Debt Service Credit
There are three primary categories for considering a credit rating:
 Mortgage Credit
 Consumer Credit
 Public Records The more serious the credit problems, the further the grade decreases (see below). As the grade on the loan decreases, lenders generally assess higher rates and fees.
Debt Ratio
Lenders calculate the debt ratio by dividing the total monthly debts (the housing expenses for the proposed loan plus the borrower's other monthly credit obligations) by the total monthly income. If a borrower has a low debt ratio, the credit-scoring grade will be higher. Conversely, if a borrower has a high debt ratio, the grade will be lower.
Maximum LTV
Loan-to-Value Ratio, or LTV as it is commonly referred to, is the ratio of loan amount to the appraised value (or the sales price, whichever is less) of a property.

Company Consolidation Debt If the credit history, debt ratio, and loan to value ratio are unsatisfactory, the quality of the loan may be downgraded to an A-, B, C or D. "D Paper" loans refer to loans known as hard money loans that are mostly based on the equity in the home and not on the borrower's credit. A lender who is making an A-, B, C or D paper loan is taking a higher risk since there is an increased likelihood of the loan defaulting. Additionally, these loans are not insured or guaranteed. The lender is compensated for higher risk by charging the borrower a higher interest rate:

Consolidation Debt Online If current interest rates were 7%, and the borrower is considered a prime borrower, the loan would be granted by a prime lender at 7%. However, if the borrower is not a prime borrower, he may seek financing elsewhere and be charged a higher rate of interest.

Consolidation Debt Free The interest rates quoted for A-, B, C or D paper loans vary among lenders. An example follows:

Debt Problem A-paper could have rates 1% - 1.75% higher than A paper
B paper could have rates 0.25% - 0.75% higher than A- paper
C paper could have rates 0.75% - 1.5% higher than B paper
D paper could have rates 1% - 1.75% higher than C paper

Credit Debt
Using the higher end of the scale above for each rating, and starting with a 7% interest rate, the following chart is an example of the interest rate a borrower may pay:

Advice Debt A- 8.75%
B 9.50%
C 11.00%
D 12.75%

Card Credit Debt Eliminate
Yes, it matters!

Debt Recovery Linda Chandler
http://www.mortgageproducts.org
http://www.mybiz1.us

Counseling Credit Debt

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