Credit Rating Resources



Credit Rating Resources

Your credit rating is one of those things that can either be your best friend or your worst enemy. Having a good credit rating is essential to getting a home equity loan. Your credit rating is affected by many of your day- to- day financial activites. Lenders use this information to determine the likelihood of you paying off the loan.

Credit History - a record of the relationship with current and past debtors. It keeps track of payment history, outstanding debts, and collections. Negative reports on credit history will negatively affect your credit rating. It is a good idea to get a copy of your credit report and review it to make sure all information is accurate.

Debt-to-Income Ratio - a calculation of income against the monthly payments made to creditors. This generally only includes debts like mortgage, car note, credit cards, and other outstanding loans. A high debt to income ratio will negatively affect your credit rating.

Loan to Value (LTV) Ratio - a calculation of the amount of the loan versus the actual value of the home. If current mortgage(s) on your home are too close to the appraised value of your home, it negatively affects your credit rating. A lender will be more inclined to grant a loan request to a person with lower LTV ratio.

Employment History - a record of the employment that tracks job stability. Lenders use this to track your income, and to see if you have had any gaps in employment . They also try to determine your potential income along with likelihood of future employment gaps.

Credit Report - a formal document issued by credit reporting agencies. These agencies keep track of the relationship with debtors and handle disputes and errors on your credit history. It is recommended that you review your own credit history before you apply for a loan. Finding out what your score is, and knowing what major items a lender will look at, could give you an advantage.

A free copy of one's credit report is available every year. If you would like to view your credit report, and/or dispute any entries on your credit report, contact one of the three major credit reporting agencies listed below:

Trans Union: 800-916-8800
Equifax: 800-685-1111
Experian: 888-397-3742


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