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What Goes Behind Your Credit Score?
A credit score is primarily based on credit report information, typically from one of the three major credit bureaus, Experian, TransUnion and Equifax. Since lenders or banks lend only against your creditworthiness, it does makes sense for you to know what factors determine your credit score.
What Is A Credit Score?
Based on the snapshots of your credit report, credit score is the number arrived to summarize your credit risk. It ranges from 300 to 850 and helps a lender to determine the risk level. Or we can put it like this, “if I give this person a loan, how likely is it that I will get paid on time?”
There are different methods of calculating credit scores. FICO is one of the most popular credit scores developed by Fair Isaac & Co. The higher is the FICO score the lower is the risk for lender.
What Affects Credit Score?
Your credit reports contains many pieces of information that reveals certain important aspects of your borrowing activities mainly focusing on:
Late payments
The amount of time credit has been established
The amount of credit used versus the amount of credit available
Length of time at present residence
Negative credit information such as bankruptcies, charge-offs, collections, etc.
Bad Credit Small Business Loans
Seeking loans with low or bad credit score can drive you up the wall. The mainline lenders may simply reject your loan application while the others from subprime market may charge you extortionate rate of interest on your bad credit small business loan.
In case you are an entrepreneur and need new business loan for growth or expansion, bad credit can put you in pickles. In such a scenario, its better to go for cash advance option that is provided irrespective of you credit history. Such cash advance is given against your future credit and debit card sales.
What Is Cash Advance Option?
Cash advance is a small business loan approved against the monthly amount you process through credit card sales. Cash advance lenders do not ask you for your credit rating and can pre-approve your loan within 24 hours. A mutually agreed upon percentage from your daily sales through credit card processing goes to the lender automatically as repayment of the loan.
How To Increase Your Credit Score?
Your credit score cannot be improved in short run but a few steps can help you improving your credit rating over a period of time. Here are a few tips:
Pay your bills on time. Late payments and collections can have a serious impact on your score.
Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score.
Reduce your credit-card balances. If you are “maxed” out on your credit cards, this will affect your credit score negatively.
If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score.
Home equity loan: Access the equity built in your home
Taking home equity loans depend on the current needs and desires that prompt you to go for home equity loans as the first choice. Home equity loan has become a fast-track way of paying down debt consolidation, for home improvement, for higher education, unexpected family emergencies, medical expenses, etc.
Home equity loans are secured against the equity in your home. Home equity is the sum total of two things:
The down payment and the monthly repayment that the borrower i.e., the homeowner has made against the total mortgage balance on his or her home.
The amount with which the property has appreciated in price will also affect the homeowner equity.
Many of us think that for taking home equity loans, you will have to sell the house. But its absolutely wrong. Being a homeowner, you can take home equity loan without selling your home. The value of your home will determine the loan amount and the rate of interest. If you want loans at low interest rate, you will have to offer high equity collateral.
In Home equity loans, bad credit report does not make too much difference. Bad credit is common now-a-days. But, having a good credit record can definitely fetch you loan at comparatively low rate of interest.
Once you have calculated the value of your home, its now time to apply for the loan. For applying home equity loans, you should bring with you the credit card or some other document for identity purpose. Lenders offer home equity loans with competitive rates on interest. So, market survey is a must. Choose the lender who provides you the best loan deal.