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How To Qualify For And Establish Good Credit |
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Written by Cornie Herring
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Sunday, 10 June 2007 |
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Word Count: 544 The credit score shows someone how desirable they are to a lender. When a lender
sizes you up to determine how much credit, if any to grant you, it usually
looking at your credit report and measures your past credit history performance
based on your credit score. Generally, a lender usually looks at these 3 keys
areas: character, capacity and capital (sometime known as 3Cs) to project how
responsibly you handle your credit obligations. Hence, to qualify for and
establish good credit, you need to get good score in these 3 areas. Let discuss
it one by one.
Character
When you promptly pay principal and interest on your mortgage, student loans,
credit card and other loans, you established a good character. By demonstrating
a strong sense of character, you persuade the lender to trust that you will make
a good-faith effort to pay your bills even if you run into financial
difficulties.
Capacity
Capacity measures your financial ability to assume a certain amount of debt.
Whenever you apply for a loan, the lender will ask for your annual income
statement and your investment portfolio and he/she also want to get to know your
other income sources. Many banks set minimum income requirements that your must
meet to qualify for certain dollars of credit. The higher your total earning,
the larger your credit capacity will be. Besides considering your sources of
income, lender also takes into consideration of your existing debts. They prefer
it if no more than a maximum of 36 percent of your income pays your total fixed
expenses, and if no more that 28 percent of your income pays for housing, either
mortgage or rent. The more debt you incur, the less credit lenders extend.
Capital
Lenders consider stocks, bonds, mutual funds, real estate, collectibles, cars
and other asset as your capital that they can disposal to retire your debts if
your character and capacity do not prove sufficient. Sometimes, lender may need
you to pledge your capital/asset for your loan if your character and capacity
are not sufficient to persuade lender to approve your application.
The Benefit of Having Good Credit
Lenders love people with good credit record to borrow money from them. That's
why people with good credit get a better offer in applying for credit. Among the
benefits of being a good credit are: the lower interest rate, faster application
approval, more attractive packages with more choices. It's mean "Save More Money
If You Have Good Credit". If you have good credit, you even can negotiate with
the lender to lower down the interest else you will turn your head to other
lender.
In Summary
Having a good credit score means you have more options available to you. You can
get loans with better terms and rates and you have more available to you when it
comes to types of loans. Good credit record build over time, hence it's never
too early to start to establish good credit record for yourself and qualify for
better options at the time your need it
Cornie Herring is the Author from
http://www.studykiosk.com/CreditBasics/
http://www.studykiosk.com
This site is an informational website on credit basics, debt consolidation and
bankruptcy.
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