Posts Tagged ‘denied loans’

Don’t Wait Until You’re Rejected to Discover Your Credit Score

July 20, 2011, by FreeScore

know your credit score before you apply for loanBeginning July 21, if you are turned down for a loan or given a less-than-favorable rate, the credit agency you applied to must show you the credit score used to determine its decision. The new regulation seeks to help consumers understand where they stand in the often-convoluted world of credit scores.

Waiting until you receive a rejection letter to discover one of your credit scores isn’t the brightest idea. Applying for new loans and credit cards, whether your application is accepted or not, can negatively impact your credit score, giving you an even higher chance of an unfavorable result.

When you sign up with FreeScore.com, you’ll have instant access to all three of your scores from the major credit bureaus: TransUnion, Equifax and Experian. You’ll be able to see what your scores are, so you can formulate a plan to get the most out of your credit. You’ll also be enrolled in 24/7 credit monitoring, which automatically emails you an alert whenever something changes in your credit profile that could affect your credit scores. Knowing all three scores before you apply for a loan will empower you to negotiate the best rate possible and spare you the embarrassment of being caught off guard by a bad credit score

Don’t tarnish your credit history with a string of rejected loans. Get all the information you need beforehand.

Were you aware of the new regulations? Do you think they will help demystify the loan or credit process for consumers?

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Credit Crunch Threatens Wine Country Expansion

October 18, 2010, by FreeScore

Winery operators have had trouble growing their business this season, with many expansion plans as well as hotel and tourism projects stalling due to a lack of credit lending.

credit crunch threatens wine countryAfter dealing with a season full of fog and mildew, exports are down and prices are flat for many wine developers. But winemakers say local banks have made matters worse, halting lending because of the recent credit crunch.

Jim Carter, owner of the South Coast Winery Resort & Spa, planned to build a new 180-suite project, complete with a restaurant and amphitheater. However, his project is on hold, and he believes it’s because banks have refused to give it the green light.

“Credit is very tight right now,” Carter told the North County Times. “Banks are very tight. If you have a hard time selling grapes or wine, you’ll have a hard time dealing with the banks.”

The credit crunch has hit the wine industry hard due to increased competition and the need for expansion in the business. Some have even halted or abandoned projects altogether because of tight credit lines, according to the Times.

Growers cite the loss of agricultural lenders during the Great Recession as the reason for the crunch, the Times reports.

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Credit Scores, Not Personal Factors, Matter to Lenders

September 22, 2010, by FreeScore

Lenders use credit scores to gauge whether an applicant has the ability to repay debt in a timely manner. Banks consider borrowers with low credit scores to be high-risk customers because loans that default have to repaid by the government. This results in losses for the bank.

A payment history, outstanding loans, and any other owed money are among the criteria used by the national credit bureaus to calculate credit scores. Equifax, TransUnion and Experian compile these statistics into a score that ranges between the mid-300s and the mid-800s. The lower the score, the worse a borrower’s repayment history is considered to be, according to Investopedia.

Nationally, the average American with a credit card had $174,447 in mortgage loan debt, $15,186 in auto loan debt, and $7,694 in credit card debt, according to the San Francisco Business Times. Debt has a direct impact on an individual’s credit score, and additional points can be taken off depending on how late payments are made.

credit scores affect loan approvalsCredit scores across the country are down two points since the start of 2010. Massachusetts, New Jersey, and California have the highest credit score averages, hovering around 685. Arkansas has the lowest average at 640, the Business Times notes. With a score below 600, it’s nearly impossible to receive acceptance for a large loan, including a mortgage.

The average credit score of a borrower who had been approved for a Federal Housing Administration (FHA) loan in 2006 was 665, according to Quality Mortgage Services, a real estate services firm. This year, the score of an FHA borrower considered excellent has been around 707, evidence that lenders are tightening their standards.

There are a number of ways consumers can look to manage their credit scores, but first, it’s important for individuals to understand what affects a payment history. Credit card and loan debt can knock points off of a score, but there are a number of things that have no effect.

Employers may list income on a credit report, but this doesn’t factor into a credit score. Individuals looking to borrow won’t be denied a loan due to a low or high salary. However, failing to make payments on an approved loan can hurt a credit score, Investopedia notes.

Utility and insurance companies take credit scores into consideration when an individual signs up for their services, but they don’t necessarily report payments to credit agencies. Individuals who are consistently delinquency on payments, however, may have their accounts sent to debt collection agencies. In this case, the debt could be reported to a credit bureau.

Similar to insurance and utility companies, a rent payment history doesn’t yet affect the credit scores of those who live in apartments. However, consistently missing housing payments can cause a drop in a person’s credit score, Investopedia warns.

Credit counseling and requesting credit reports are valuable tools that don’t hurt a payment history in the long run as well. Consumers who keep track of their personal finances and manage minimum payments on their debt have a greater chance of maintaining a strong credit history.

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FICO Study: Bank Risk Professionals Don’t Expect Looser Credit Standards

September 10, 2010, by FreeScore

This week, FICO released the results of a survey that asked bank risk professionals to comment on how they expect the credit card industry to change during the next six months. Nearly 73 percent of those surveyed predict the number of credit card applications to either increase or remain steady, Bankrate. However, 46 percent of the respondents believe lending restrictions will become more strict.

credit card lending restrictionsAmericans seem to have shifted their focus to rebuilding their savings, paying down their debt, and improving their credit scores. If lending standards are tightened, however, consumers will have fewer opportunities to borrow and reinvigorate their payment histories, analysts say.

Approximately 99 percent of survey respondents say they expect firms to heavily consider risk management when lending to borrowers during the next six months. FICO says the results of this study show an expanding gap between credit supply and demand.

Analysts recommend using credit responsibly as the most efficient way consumers can help their payment histories without having to apply for more cards.

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Your Credit Score Can Be Affected By Corporate Card Usage

September 8, 2010, by FreeScore

corporate cards and personal creditIn 2009, Americans charged $140 billion to their company credit cards, covering everything from flights and hotel rooms to office supplies and party favors. Financial analysts, however, are warning consumers to monitor their spending habits closely this year, as new statistics show that they may get stuck with the bill.

ABC News reports that 35 percent of company credit cards have joint liability or individual contracts that hold the employee responsible for the debt. Surprisingly, a majority of Fortune 500 firms make their card holders pay for all charges as well.

Charley Heiges is one of many Americans who found himself stuck with a corporate credit card bill months after several expensive charges had been made — and after the company he worked for went out of business. He only discovered he was responsible for the account when he was turned down for a personal loan.

“My credit score had been destroyed. My life had been destroyed,” Heiges told ABC. “I basically lost everything.”

Corporate card charges can show up on personal credit reports, tipping consumers off to any company expenses before the debt grows out of control and inflicts credit score damage. Consumers who carry company credit cards are advised to keep an eye out during the application process: if they’re asked to provide personal information and/or to pay off the credit card charges and request reimbursement, it’s likely that their business credit card transactions will appear on their credit reports.

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Using Credit Can Help Make Consumers More Attractive to Lenders

August 13, 2010, by FreeScore

Credit card issuers and banks have tightened their lending restrictions amidst the suffering economy, making it more difficult for Americans with poor credit scores to qualify for loans. However, the New Jersey Star-Ledger reports that if consumers want to improve their credit scores, they need to use plastic to begin the rebuilding process.

build credit with credit cards“If you have used cash for your purchases and are in great financial shape with a positive net worth, positive personal balance sheets, and no debt, you will be penalized for not using credit should you need a loan or credit card,” O’Meara Financial Group representative Margaret O’Meara told the paper.

Before applying for a credit card, you’re advised to ask the issuer whether it will report your transactions to the national credit bureaus. This will determine whether your credit card payment history will appear on your credit report and therefore be used as a factor in calculating your credit score at each bureau.

If an issuer doesn’t approve you for a credit card, you might want to consider applying for a secured credit card with a set balance.  Making on-time payments on a secured credit card is another way to demonstrate responsible credit usage.

Asking a relative or friend with a better credit score to co-sign can also increase your chances of loan approval. However, both you and your co-signer will be affected by the loan’s payment history, so your co-signer may want to verify that you’ll be able to pay off the loan before he or she agrees to co-sign the loan.

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Franchises Denied Loans Due to Economic Recession

July 28, 2010, by FreeScore

franchises denied loansFranchises across the U.S. have recently been feeling a financial squeeze as banks tighten the reins on lending. The economic recession has rightfully scared banks from administering loans, and those interested in opening franchises are consequently suffering.

“Banks have hit the reset button,” Bankers One Capital president and chief executive Reginald Heard told the New York Times. “They’re just holding onto capital and being conservative on how they approach new deals.”

Unfortunately, even people with good credit are being turned down for loans by banks these days. The severity of moderation displayed by banks highlights the importance of credit scores. Credit scores determine whether or not you’re eligible for a loan, and if the recession is causing banks to deny loan applications from people with good credit, there’s almost no hope for those with bad credit.

Credit monitoring is the most efficient way to keep an eye on your credit status. By reviewing your credit reports and scores regularly, you can take action when needed to address any weaknesses and thereby advance your chances of being granted loans and stay financially afloat in these turbulent times.

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Posted in Economy, General Economy | No Comments »