Are you planning to make a big purchase? While this purchase may be quite exciting for you, it comes with a lot of stress too. If you are going to take a loan then you must have a clear picture of your credit. This is not so easy as different reporting agencies have different scores. Learn more Here about facts that will help you get aquainted with lending process and credit.
What is credit score all about?
Different reporting agencies have different strategies to determine your credit score. This determines your credit. As per loans now the credit score is payment history’s 35%. Your payment history shows how much responsibly you pay your bills and is the biggest factor to determine your credit score. If you are late by a month then it gives a negative impact on your score.
The amount you owe currently contributes to 30% of your score. If you are already under lot of debt and you are maxed out then you have a poor score. Because you do not have much left to pay your new loan. Age is another major factor that is 15% of your score. If you have a longer credit history with a responsible behavior then it is good for you.
10% of the credit score depends upon the type of your accounts. They consider whether you have installments, credit accounts or revolving credit. The last 10% is determined by the number of inquiries that you have got for credit. If you have approached several lenders and did not get approval then it is a bad situation as lender would check why your loan was not approved by so many other lenders.
If you have checked your credit score and it was not good then you can check on these factors to improve it. You can wait and improve and then check back again.
How to discuss with a lender and what is lending process?
After understanding the credit score, it is important to discuss with the lender about options. Discuss about what you are going to do with the money. Lender would inquire about your income and spending and then you must decide if you can afford the installments. If it is good enough then you can pull your credit.
After looking at your credit the lender will give a pre-approval or a rejection. After pre-approval you must see documents and proof of income. Lender would inform about rate of interest you will be charged. After documentation, loan will be closed.
This is the simple process of lending. You must keep a check on your credit stacks up and manage finances wisely. Also it is good to plan for your future and retirement as well as big purchases well in advance.