Owning a home is part of the American dream. It’s also the biggest purchase that most of us will ever make, and because of that, almost everyone will be borrowing money to do it. Unfortunately, for many people that means a bad credit home loan, and that might be hard to get.
It’s simple. Imagine going to a bank and asking for $200,000. And then imagine that you have bad credit. You’re always behind on your bills, your credit cards are stretched to the limit – or you have no credit cards – and you have no collateral. Now try and imagine what the bank will say.
Having a home is a big part of the American dream, but having bad credit is a big part of the American reality. There are a lot of people with bad credit who want to buy homes, but how can they convince a bank or other lender to give them money if it’s clear they’ve never been able to pay their bills on time?
The first thing to do if you’re contemplating buying a home and you have bad credit is to try and establish good credit. Make sure you pay your bills promptly. If you don’t have a major credit card, get one, use it and pay the bills promptly. You’re trying to convince a lender that you can be trusted to pay back money you’ve borrowed. Next, you want to carefully check your credit score.
Your credit score is a history of all of your financial activity as it pertains to credit; in other words, how much and how often you have borrowed and how promptly you’ve paid it back. Credit scores are generated by three companies:Experian; Equifax and TransUnion, and you’re allowed one free credit report a year from each of these companies. If you’re thinking of borrowing for a house, check your credit report; it’s entirely possible that there are mistakes that could lower your score.
Now assume that you’re on your way to establishing credit (but you’re not quite there yet) and your credit report is accurate. The next step is to find someone who is willing to lend you money, and that is probably the easiest step of all. With so many Americans have bad credit, mortgage companies have responded by loosening restrictions on loans and almost all of them have special bad credit programs. Of course, these people aren’t giving the money away. You’ll still have to go through the application process and there are some criteria – loan-to-value ratio, debt-to-income ratio, and monthly income – that they will use to determine whether or not you are a good risk. However, don’t forget that if you have bad credit and a mortgage company is willing to talk to you, they want your business, so don’t be afraid to negotiate.
But what if the private mortgage companies and the banks turn you down? Are you out of options? Not at all. There are a lot of different ways you can get money for a house if you have bad credit. A good place to check is the Federal Housing Authority (FHA.) FHA loans have very generous conditions (the down payment can be as low as 3% or less), they are willing to help people with bad credit and they have various programs that offer excellent deals to professional people – police officers, teachers – to encourage them to become homeowners in the community where they work. Another good choice is Fannie Mae. This private company can make home loans easily available – even if you have bad credit – through their Expanded Approval Program.
Getting a bad credit home loan can take extra time, but it’s worth the effort. Interest rates are low and there are a lot of options. Don’t delay your dream.
Showing posts with label bad credit refinance. Show all posts
Showing posts with label bad credit refinance. Show all posts
Saturday, August 11, 2007
Sunday, August 5, 2007
Bad-Credit Car Loans Are Possible
Bad-credit car loans may not be easy to find, but if you need a car, they are worth it.
Bad-credit car loans carry a higher risk to the lender, so the borrower must pay a higher than usual interest rate. You probably will need to apply to more than one lender and give more documentation. Still, a bad-credit loan is worth the trouble because it not only lets you get the car you need and want, but can also help improve your overall credit rating.
Getting a Car Loan with Bad Credit: 4 Steps
1. Contact Equifax, Consumerinfo, or TrueCredit online for your credit score or to make sure there are no errors on your credit report. You can usually dispute the incorrect information online or over the telephone. If you have correct unfavorable information, you can write a letter to the company that reported the unfavorable information, asking them to remove that information or make a note that your accounts are now in good standing. Usually they won't do this, but it doesn't hurt to try.
2. Determine your credit score (also called a FICO score). There are simple online guidelines for estimating your credit score yourself. Still, to get a truly accurate score, you need to purchase it from the credit bureaus.
a. Note that each bureau may have a slightly different score (and possibly a very different score if they have information the others do not). There are online credit-monitoring services that will provide you a single report with all three reports and credit scores.
b. A score of over 680 out of 850 will get you a low-rate auto loan. Under 680 will mean a higher rate but a loan is still quite likely. Bad credit begins around 650 and lower. You will be charged high interest no matter where you go, and may not qualify for as large a loan. But it will still be a loan nonetheless.
3. Look on the Internet for names of lenders that specialize in bad credit car financing. They can be private lenders, car dealers or any website offering this type of loan help. Compare the rates and terms with what your own bank offers. Make a short list of lenders with good rates and terms.
4. Call up the lenders and ask them about their credit guidelines. They will often be reluctant to state a single FICO score, but you can sometimes get them to tell you a range. It’s important to make sure you have a fighting chance at approval before applying. A bunch of rejected loan applications will look bad on your credit report--creating a vicious cycle that makes it even harder to get a loan.
Bad Credit Car Loans: A Typical Story
Stephen got a credit monitoring service to provide him with his reports from the three credit bureaus, as well as their three FICO scores. He was shocked to find his credit score was 560. He was reported as having defaulted on one of his students loans, which was incorrect. He was able to get that removed quickly. But his credit rating was still well below 650.
What should Stephen do now? Of course, Steven should work to repair his credit rating:
• Pay all bills on time.
• Stay at the same address and the same job for a few years if at all possible.
• Contact the lenders who reported negative information to the credit bureaus to see if they will remove it or amend it to emphasize that his accounts were eventually returned to good standing.
But in the meantime, Steve needs a car loan. His job isn’t a on a bus route and he can’t pay cash. After careful research on the internet, Steve finds he could get a high-interest bad-credit auto loan. The loan will also give Steve another chance to restore his credit.
To take a bite out of the interest, Steve gets a friend of his who’s a mechanic to help him find an inexpensive but reliable used car—which means a smaller loan and therefore smaller interest payments. He also dips into his savings and 401(k) to pay as much up front as he can, since the interest on the car loan will outpace the interest he could earn on these accounts.
Five years later, Steve’s credit rating is as good as gold and he trades his used car in for the car he always wanted.
What will you be driving in five years? If you plan well and get the best deal possible on your bad credit car loan, you’ll go far whatever you’re driving.
Bad-credit car loans carry a higher risk to the lender, so the borrower must pay a higher than usual interest rate. You probably will need to apply to more than one lender and give more documentation. Still, a bad-credit loan is worth the trouble because it not only lets you get the car you need and want, but can also help improve your overall credit rating.
Getting a Car Loan with Bad Credit: 4 Steps
1. Contact Equifax, Consumerinfo, or TrueCredit online for your credit score or to make sure there are no errors on your credit report. You can usually dispute the incorrect information online or over the telephone. If you have correct unfavorable information, you can write a letter to the company that reported the unfavorable information, asking them to remove that information or make a note that your accounts are now in good standing. Usually they won't do this, but it doesn't hurt to try.
2. Determine your credit score (also called a FICO score). There are simple online guidelines for estimating your credit score yourself. Still, to get a truly accurate score, you need to purchase it from the credit bureaus.
a. Note that each bureau may have a slightly different score (and possibly a very different score if they have information the others do not). There are online credit-monitoring services that will provide you a single report with all three reports and credit scores.
b. A score of over 680 out of 850 will get you a low-rate auto loan. Under 680 will mean a higher rate but a loan is still quite likely. Bad credit begins around 650 and lower. You will be charged high interest no matter where you go, and may not qualify for as large a loan. But it will still be a loan nonetheless.
3. Look on the Internet for names of lenders that specialize in bad credit car financing. They can be private lenders, car dealers or any website offering this type of loan help. Compare the rates and terms with what your own bank offers. Make a short list of lenders with good rates and terms.
4. Call up the lenders and ask them about their credit guidelines. They will often be reluctant to state a single FICO score, but you can sometimes get them to tell you a range. It’s important to make sure you have a fighting chance at approval before applying. A bunch of rejected loan applications will look bad on your credit report--creating a vicious cycle that makes it even harder to get a loan.
Bad Credit Car Loans: A Typical Story
Stephen got a credit monitoring service to provide him with his reports from the three credit bureaus, as well as their three FICO scores. He was shocked to find his credit score was 560. He was reported as having defaulted on one of his students loans, which was incorrect. He was able to get that removed quickly. But his credit rating was still well below 650.
What should Stephen do now? Of course, Steven should work to repair his credit rating:
• Pay all bills on time.
• Stay at the same address and the same job for a few years if at all possible.
• Contact the lenders who reported negative information to the credit bureaus to see if they will remove it or amend it to emphasize that his accounts were eventually returned to good standing.
But in the meantime, Steve needs a car loan. His job isn’t a on a bus route and he can’t pay cash. After careful research on the internet, Steve finds he could get a high-interest bad-credit auto loan. The loan will also give Steve another chance to restore his credit.
To take a bite out of the interest, Steve gets a friend of his who’s a mechanic to help him find an inexpensive but reliable used car—which means a smaller loan and therefore smaller interest payments. He also dips into his savings and 401(k) to pay as much up front as he can, since the interest on the car loan will outpace the interest he could earn on these accounts.
Five years later, Steve’s credit rating is as good as gold and he trades his used car in for the car he always wanted.
What will you be driving in five years? If you plan well and get the best deal possible on your bad credit car loan, you’ll go far whatever you’re driving.
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