This world revolves around a spending system tied to credit. We depend on it one way or another—even if we just obtain a credit card to book rental cars, hotels and flights.
Credit is when someone or an institution lends money. They don’t do this out of the kindness of their hearts. They do it to earn profits, and they intend to be paid back with interest.
To obtain credit, one must have something of value to use for collateral. If you fail to pay the loan as specified, they take the collateral, liquidate it and collect the funds owed.
Even if you have collateral, you may not be credit worthy. Credit is given based on your financial ability to pay. You must show proof of a source of legal, steady income. You must have a clean record indicating you pay debts on time.
How do they find this out about you? No worries. Data is available and easily accessed about your spending habits. When you apply for a loan you are required to allow the lender to check your credit rating. What is that?
Credit rating is a method of establishing, for the marketplace, your ability to buy. It measures your income minus debts and creates a debt ratio. Lenders, especially mortgage brokers, require evidence of a pattern of savings and an established emergency fund. They also want to see a record of payment for present and past debts on time and in full.
Over and above the portion of your income needed for living expenses, you should not be leveraged (have liens) over an established ratio of your income. If you owe too much, it is assumed you will have difficulty repaying obligations. If your income vs. debt ratio is too high, your credit rating is very low. This affects your ability to obtain a loan.
If your credit history shows payment problems, but you are approved for a loan, you will likely get a higher interest rate because you are perceived to be in a situation where you may default on the loan. In other words, they make you pay more, because you are considered a poor risk. This costs you lots of cash over the course of the commitment.
Lenders seek buyers with high untapped borrowing power. If you owe very little, it is a good thing. If you have a steady, substantial income and are barely leveraged, you are a great risk. Your buying power is worthy. Your credit rating will reflect this in a high rating.
Credit ratings have become more important over the last few years than ever before. They affect not only your ability to buy a home and vehicle, but other things as well.
Employers check credit ratings, with the assumption someone with a bad rating may be frivolous or careless and will be a poor employee. Insurance companies base premiums on car, boat, home insurance on credit ratings, figuring the same thing. If you are careless with money, you will be careless with possessions. The more responsible you are, the greater your chances at the job you want, and your insurance will likely be cheaper. Many people check credit ratings before accepting dates or marriage proposals, so it can even affect your love life.
Three main bureaus collect and report data for the financial world. This gives lending institutions perspective to determine financial risk and whether they should lend you money. They collect late and less-than-full payment, repossession and default data reported electronically by lenders.
Data is submitted by name or social security number. Names and numbers are similar, so there is room for error. For instance a father and son with similar names can have drastically different financial situations, but can easily be mixed up. If you’ve been turned down for a loan, you have a right to a free credit report. Errors should be disputed. There are ways to work with the bureaus to correct mistakes. It is your responsibility to ensure your report is accurate, and for good reason.
Most lenders use one or all three of the below three main credit bureaus to learn about your financial status.
Experian, P.O. Box 2104, Allen, TX 75013, 1-888-397-3742
Equifax, P.O. Box 740241, Atlanta GA 30374, 1-800-685-1111
Trans Union, P.O. Box 1000, Chester, PA 19022, 1-800-916-8800
Paying bills in full, on time or early and never missing a payment can help you keep a clean credit history. This is essential to build financial security and help make your dreams come true.
NOTE FROM THE AUTHOR:
I hope this information has been helpful and you enjoy my work. Let’s become life-long friends.
Lynda Rees Love is a dangerous mystery
ABOUT THE AUTHOR
Lynda Rees is a multi-published historical and suspense award-winning romance author. Freckle Face and Blondie is a children’s suspense, middle-grade, co-written with her ten-year-old, author granddaughter, Harley Nelson. Lynda has published two suspense novels about descendants of mobsters—God Father’s Day and Madam Mom. Her 2016 award winning historical novel Gold Lust Conspiracy depicts a woman’s struggle during the savage 1890’s Alaskan Gold Rush. Parsley, Sage, Rose, Mary & Wine, is Book one of The Bloodline Series and a 2015 and 2017 Golden Heart and RITA finalist.
The Bloodline Series, consisting of the following books, is set in Kentucky horse country. They are:
Blood and Studs – Hot Blooded – Blood of Champions
Bloodlines & Lies – The Bloodline Trail – Horseshoes & Roses
Real Money and The Bourbon Trail are due to launch early 2019.
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