RESOURCES
A Lender’s View of Your Credit Report
When you first look at your credit report, it can look like a maze of words and numbers. However, future creditors are reading this information to determine if they will lend you money or even what your insurance premiums will be; so it is a benefit to understand this information. There are three categories of information that are reviewed.
The first area is your primary information. This will included your name, current and past addresses, social security number, and possibly your employer and job title. A lender will be looking for valid information and for other possible credit references.
The second area of review is your credit history and if there are any collections, judgments, or late payments. Regarding collections or judgments a lender is looking at the amount still owed, what has been paid, and how long it took to repay the debt since the initial report. Typically, judgment balances will need to be paid before or at closing, depending on the nature of the debt, amount owed, and the creditor. Medical collections usually cannot be paid prior to close.
Related to late payments, the question is whether you pay your creditors back as expected and your track record over the past 7 years. Creditors want to know your responsibility toward debt. Do you pay things off on a timely basis, or will they need to continually follow-up with you?
The third, and most significant impact to your credit worthiness, is your recent payment history. This indicates your current financial situation. Are things tight? Are you having troubles making ends meet? Has your debt load started to catch up with you?
Show your creditors that you have control of your finances. Prove that any past problems are under control with current and consistent payments. Making lump sum payoffs on debt often do not reflect this. Paying down a loan balance some first, followed by timely payments, will have a more positive impact.
There are some simple steps you can take to improve your credit score. First, review your list of creditors to determine if you really need all of your credit cards. Even if the credit limit on each card is relatively low, several cards can together accumulate a large debt load.
Next, reduce your credit card balances to under 50% of each card’s limit. The preferred method is to pay down the balance. However you can ask the creditor to increase your credit limit, or do both. Regardless of the method, getting the balance to less than 50% of the limit will have a significant impact.
Finally, if you have any judgments or collections, contact the creditor to negotiate a lower pay off with you. If they are willing to work with you, be prepared to send the agreed upon payment out to them promptly. Write down the contact name, date and time of call. Request a receipt showing full payment of the debt and a confirmation that they will contact the credit bureau with your updated information. Never send cash, only send a money order (keep the copy) or a personal check (as last resort, because they will wait for your check to clear before they consider your bill paid in full).
If you find that the person you are talking to is unwilling to provide this information, ask to speak with their manager. You are only asking them to confirm what they have already said they would do. Unfortunately, this does not always happen. The good news is that you can now contact the credit bureaus with the information you have collected to have your credit updated.
