- Can the interest rate on my loan contract be changed?
You may be able to change your interest rate if your contract is set up that way. The best way to find this out is to talk to a professional to see if the change is valid.
- Do credit bureaus approve me for a loan?
Credit bureaus provide lenders with copies of your credit report. This is what most lenders base the decision on whether they are going to grant you credit or not. Credit bureaus do not make the decision for the lenders. It is up to that lender to decide what the acceptable criteria is for them.
- What is a lien holder?
A lien holder is the institution (usually a bank) that has the right to take and hold or sell the property of a debtor as security or payment for a debt borrowed from them.
- What does APR stand for and what does it mean?
APR stands for Annual Percentage Rate. The APR on a loan includes the costs involved in securing the loan such as the interest rate, points and other related fees you will be paying annually. The APR is meant to provide you with a rate to use when comparing loans.
- What is the difference between revolving loans and installment loans?
A revolving loan is one that is automatically renewed upon maturity.
An installment loan is one that you pay at a certain specified rate. Example: Monthly, weekly, bi-weekly, annually.
- What is home equity?
Home equity is the difference between the market value of your home and the amount you have paid towards that value.
- What is a home equity line of credit?
A home equity line of credit is a form of revolving credit in which your home is used as collateral.
- What is the difference between a home equity loan and a home equity line of credit?
While both are considered second mortgages, with a home equity loan all funds will be paid at closing. A home equity line of credit provides you with a credit line that you can borrow against where your home is used as collateral.
- What is debt consolidation?
Debt consolidation plans involve reorganizing your outstanding debts with your existing creditors. Money is not loaned and creditors do not change, however, the terms and conditions under which the outstanding debt can be repaid usually changes significantly.
The purpose of debt consolidation is to put you on a road to paying off your debts at a faster rate while at the same time, making lower monthly payments. Using a debt consolidation plan usually helps improve your credit as well, since most creditors report payments received under this plan as prompt payment.
- What is bankruptcy?
Bankruptcy is the term that describes the court proceedings a person must go through to relieve the debts they are unable to pay their creditors.
- What is a credit score?
A lender figures your credit score (FICO score) by taking your credit history and measuring it against a database of habits in the general borrowing population. That, in turn, determines whether your tendencies match those of borrowers who default on debt, declare bankruptcy or find themselves in various types of financial difficulties.
- What factors determine my credit score?
When determining how high a credit score will be, the following five characteristics typically separate good credit from not-so-good credit:
- Late payments in the past. People who have failed to make timely payments in the past are more likely to do the same in the future.
- How you have used your credit in the past. If you have one or more credit cards that are maxed out or close to it, you are more of a risk than a person who has a high limit but is not anywhere close to using it up.
- The length of your credit history. People who have had credit for a long time generally pose less of a borrowing risk.
- The number of times you have applied for credit. The number of times you have applied for loans, credit cards or other debt instruments may count against you when wanting receive yet another loan.
- The number of different types of credit you have. Someone with a combination of installment and revolving loans is generally less risky than someone who has only a secured credit card.
- What is considered a good credit score?
Once a lender has gathered all the information, they will come up with a number roughly between 300 and 800. A number higher than 660 will almost guarantee you a loan. Anything between 620 and 660 isn't bad either, but you may have to convince the lender the loan is worth it. If your credit produces a number lower than 620, receiving a loan is going to be difficult.
Of course, sometimes exceptions are made if the credit report has incorrect, incomplete, or not enough information on it. An unusual event such as a job loss or extended sickness may excuse borrowers as well, according to the lender.
- Why is credit important?
If you are looking for a loan, credit card, or low interest rates, having good credit will increase your chances of getting one of these. If you have credit problems, it may be hard to acquire a loan when you need it the most.
- What is the best way to build a good credit history?
The trick is to start small: try applying for credit with a local business, such as a department store, local bank or credit union. Before you apply for credit, you may want to make sure the creditor reports credit history information to one of the major U.S. credit bureaus so you can build your history. You may also want to apply for a credit card, use it once, pay the entire balance and then tear it up.
If you are having difficulty opening a credit account include asking a friend or family member to cosign your loan or credit card application. You may also want to apply for a secured card, which is guaranteed by a deposit you make to the card issuer.
