Make your credit report look low risk to creditors

In this current market and probably for future lending markets lenders will be looking at your credit report very closely . I figured I would provide some quick tips to make no only your credit report and credit scores look better, but you’re over all risk to a lender. In this current market even if you have good credit you could get denied for a loan.

Keeping your debt low
In the past you could have really high income to debt ratio’s and still get approved for loans. All of us in the lending market thought this was crazy, but it was getting done. In a nutshell this amounted to families getting homes that they could not really afford. In this market you better have low credit card debt or debt period. Because the underwritten engines and requirements for general debt is quite a bit lower than it was in years past. So the bottom line is to keep your debt ratios 41% or less. Here is how you calculate this.
Take your gross income and divide it by your total monthly obligations. The total monthly obligations would be only debt that reports to the credit bureaus. For example:
• Credit cards
• Auto loans
• Mortgage loans
• Installment loans
• Student loans

Lenders don’t look at your utility payments or any other obligations that does not report to the 3 credit bureaus typically. So make sure you only count your obligations of credit only.

Save your money
When getting a loan in this current market, lenders like to see that you have the ability to save. When you have savings it makes your risk lower to the bank. A good goal would be to save a minimum of 6 months mortgage payment in the bank. Lenders also like to see stocks and 401k. This is also considered saving as well. The great thing about having savings is if an emergency comes up you have the money to pay your bills so it does not affect your credit report.

Have a mix of credit on credit report
When a creditor looks at your credit report they like to see some type of activity along with a mix of credit. Examples of a mix of credit would be a couple credit cards, installment loans, auto loans, etc…….. The Fair Isaac Score model takes into account the mix of credit yiou have to determine your credit score. So if you are a cash only buyer, charge a little on your credit and pay it off at the end of the month. Creditors have to see what you are doing, and that is why they pull your credit report. So don’t be afraid of credit, at the same time be responsible with it.

One Response to “Make your credit report look low risk to creditors”

  1. debt consolidation says:

    Credit card debt is a problem for many people and is a major contributor to personal debt. Funding your lifestyle with a credit card is easy but the hard part is paying it off and clearing the debt.

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