Bad credit is the main reason why some homeowners can't get a loan against the value of their home. We called it a "bad credit home equity loan" at my company.
If you have bad credit and are trying to fix it, it can help to know how your credit score is calculated and what factors go into it.
Fair Isaac Corporation makes the credit score, also called the FICO score. It is a number that many lenders use to figure out the interest rate you will have to pay as a homeowner. The range of scores is from 300 to 850. Your interest payment will be higher if you have a low credit score. Most people who want a home equity loan with bad credit have a credit score of less than 600.
Your credit score is like a financial report card that lists all of the big deals you make with lenders. So who keeps track of your credit score? In the United States, it is done by Transunion, Equifax, and Experian, which are the three largest financial institutions.
When figuring out your credit score, they look at how much money you owe to banks, lenders, and other people. How long and what kind of loan. Like the loan on your credit card. Your record of whether or not you have paid your loan or interest on time each month. The things that are in your name. Homes and cars are good examples. If you have a job, it also takes into account how much you make each month.
Keep in mind that your credit score may not always be right. In fact, a recent survey found that up to 80% of all credit scores are wrong. I don't think it's that high, but there are times when a person's credit score is very low even though they have a good credit history and no loans to pay off.
If you think this is happening to you, you can ask the three big banks I mentioned earlier about your credit score.
What if two people who are married want to get a home equity loan? The person with the largest income is used to figure out the credit score.
So, if you want to get a home equity loan but you have bad credit, you should try to pay off your other loans first. This will help you get a better credit score. A loan consolidation plan is another thing you can do. By doing this, you're basically paying off the old loans and getting a new one, so your credit score will usually go up.
