5 reason why you need to have good credit

Learning about what is a Good Credit Score

The economy today runs on credit, if you want a student loan, mortgage loan or you just want a credit card to pay for your lunch meals, a company will be giving you credit. Your credit score is defined by a three digit number that that determines the likelihood of an individual to pay back the borrowed money and it is the key to one’s financial life.

An individual’s credit score is calculated using his or her payment history, length of payment, the frequency of loan application and the current debts. Since scoring systems use different criteria, the major credit bureaus may give different credit score for the same individual but the score will have the same credit information.

Why you need to have good credit

As stated above, loans are an important part in life, everyone needs to have a good credit. Building a high credit and maintaining it can have an impact in the quality of life now as well as in the future especially when you are considering applying for loans and prepaid debit cards. Here are some the reasons why you need a good credit score.

· When buying a house

Purchasing a house is one of the greatest investment you will ever make in your life but it can be hard to achieve if your credit score is not good. Even though the housing market has rebounded, lending companies are still very cautious and there are strict requirements in order to qualify for a loan and anyone with a bad credit history will not qualify for a mortgage loan.

Also, renting a home also involves a credit check and if you have any delinquent credit, you may not be able to rent the apartment or house or you may be required to pay a higher deposit compared to a tenant with a good credit score.

· Buying a Car

What is a good credit score to buy a car? Cars are a common purchase and most people take loans to be able to buy the car of their dreams. Though car loans are smaller compared to house loans hence one can easily get even with a not so good credit score but a poor credit score will get you a car loan with a large down payment and higher interest rates on the acquired loan. This means that you will pay much more compared to another person with a better credit score.

After buying the car, you need auto insurance and almost all insurance companies factor in the credit score when calculating the premiums payments. Therefore, having a good credit will help you save on car insurance money as well.

· Starting a Business

If you plan to start a business and you need to acquire a business loan, the credit score is a major factor in determining whether you qualify for financing. Whether you are looking for finances to expand an existing business or you are looking to start a new business, your credit score will certainly affect your eligibility to get the business loan.

· Getting a Job

Employers today are now checking the credit history of prospective employees before hiring them. This is common especially in the financial sectors and government organizations. A negative credit history or score can keep you from getting that dream job.

· Getting Lower Interest Rates

While a good credit will help get access to most of the financial assistance in most banks but those with a bad credit can still get the loans. However, if you have a damaged credit score, you will need more documentation in order to get the loan and the loan will have a higher interest rate. This is what banks use to outweigh the risk of lending money to individuals with a bad credit score.

If you want to access bank loans with lower interest rates, you should strive to keep your credit score high by making all your payments on time, paying loans before the end of the set period and paying the credit card in full.

A bad credit score indicates that you are a risky bet. It does not only show how bad you are with paying debts but it can also imply that you are as irresponsible in taking care of a rented apartment, driving the car or showing up for a job. A good credit, on the other hand, implies that your financial situation, as well as the rest of your life, is right on track. If you need help getting your credit back in order, you should look into creditrepair.com.

10 reasons why your mortgage loan may be rejected


Buying a home can be a very distressing experience for many people today. The criteria for getting a mortgage have become stricter. New rules are in place and many people fail to get their desired mortgage to buy home. According to statistics, millions of mortgage applications are rejected every year. So, before you apply for a mortgage, you need to learn about the whole procedure so that you can minimize your risk of getting rejected. Here are 7 circumstances in which your mortgage application might be rejected.

Switch jobs

You need to show proof of your employment for the past two years. Some lenders require that you must be on one job consistently for a period of two years at least. So, if you keep on switching jobs then your mortgage application may be rejected. Changing too many jobs indicate that you are unstable and might not be able to pay off your mortgage later on. However, if you have changed job to advance in your career or as a result of a promotion, then it won’t have any effect on your loan application. But if the change in job has affected your income negatively then there is less chance of your mortgage application being approved.

Get a new loan

Your credit history affects your mortgage application. If you get a new credit card after applying for a mortgage and before getting the approval, then there is high chance that it will take more time to review your application. Your application might be rejected as well. The same thing will happen even if you apply for a car loan while your mortgage application is being reviewed.

Close an unused credit card

It may surprise you knowing why closing an unused credit card will affect your mortgage application. The lenders look at your credit utilization ratio when giving you a mortgage. This ratio equals to the total amount of credit you have compared to the amount of credit you are using. So, if you close one credit account, your credit utilization ratio increases. As a result, your mortgage application may be rejected.

Change in mortgage requirements

Sometimes the requirements for obtaining a mortgage change.  For example, in the past, you needed to have a minimum credit score of 650, but now you need to have a score of 680. If you are not aware of these changes and apply for the mortgage then there is a chance that your application may be rejected.

Change in your credit report

Your credit report changes regularly. If you take an additional loan or fail to pay a month’s credit card bill, then your credit score will be affected. Missed payment or late payment of bills can lower your credit score and affect your mortgage application.

Buy a different kind of property

Lenders may be unwilling to give a mortgage for certain kinds of properties. These include investment properties and condos. To get a mortgage for this type of properties, you may need to give a larger down payment. So, before you apply for a mortgage for this type of property, you should ask your lender whether your condo is on their approved condo list.

Borrow the down payment

You should pay your own down payment, without borrowing money from elsewhere. If you buy the entire house on credit, you won’t feel back walking away without paying your loans as you don’t have anything to lose. But if you invest in your own house, then your money is on it. You will feel the urge to pay the mortgage on time so that you can be the owner of the property.

Borrow too little money

The minimum amount you need to borrow for a property is $50,000. Some lenders raise the minimum amount to $75,000 and even $1, 00,000. If you borrow less money then you will be paying less interest and the lenders will make less profit. If the lender sees that the risk of giving you mortgage is more than the profit they will earn, they might reject your mortgage application.

Loans went to collections

If your debts have ever gone to collections, it might hurt your credit score. So, you will have less chance of getting a mortgage approval. However, the information won’t be there on your credit report forever. You can talk to a credit repair firm and know what to do to improve your credit report.

Owe money for child support

If you owe money for child support or alimony, then it will be considered as debt. You should mention this in your application. The lenders will investigate your case and find out your financial status. You might need to have a higher credit score to be eligible for a mortgage if you owe money for child support. There is a chance that your mortgage application may not be approved.

You need to be honest about the information you provide on your application. You should provide your income information in detail, your credit score and other information so that the risk of rejection is low. If you have any red flags on your credit report, you should fix it before applying for the mortgage. You shouldn’t do anything to negatively impact your credit score when you apply for a mortgage, like getting a car loan or a new credit card. It is more difficult to get a mortgage today than it was before. The credit standards have been tightened. According to a statistics, only 55% of the mortgage applications are accepted today. So, you should prepare well before applying for a mortgage in order to decrease your chance of rejection.