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Loan Credit Rating
Your credit rating is one of those things
that can either be your best friend or your worst enemy. Having
a good credit rating is essential to getting a home equity
loan.
Your credit rating is affected by many of your
day- to- day financial activites. Lenders use this information
to determine the likelihood of you paying off the loan. (Learn
more about preparing your credit)
Credit History - a record of the relationship
with current and past debtors. It keeps track of payment history,
outstanding debts, and collections. Negative reports on credit
history will negatively affect your credit rating. It's a
good idea to review your credit report to make sure all information
is accurate.
Debt-to-Income Ratio - a calculation of
income against the monthly payments made to creditors. This
generally only includes debts like mortgage, car note, credit
cards, and other outstanding loans. A high debt to income
ratio will negatively affect your credit rating.
Loan to Value (LTV) Ratio - a calculation
of the amount of the loan versus the actual value of the home.
If current mortgage(s) on your home are too close to the appraised
value of your home, it negatively affects your credit rating.
lenders are more inclined to grant loans to persons with lower
LTV ratios.
Employment History - a record of the employment
that tracks job stability. Lenders use this to track your
income, and to see if you have had any gaps in employment.
They also try to determine your potential income along with
likelihood of future employment gaps.
Credit Report - a formal document issued
by credit reporting agencies. These agencies keep track of
the relationship with debtors and handle disputes and errors
on your credit history. It is recommended that you review
your own credit history before you apply for a loan. Finding
out what your score is, and knowing what major items a lender
will look at, could give you an advantage.
A free copy of one's credit report is available every year.
If you would like to view your credit report and/or dispute
any entries, contact one of the three major credit reporting
agencies listed below:
| Trans Union: |
800-916-8800 |
| Equifax: |
800-685-1111 |
| Experian: |
888-397-3742 |
You may also find it more convenient to do this online. Here
is a link to an Equifax site that offers a paid membership
to access your reports, notifications of changes, and many
more valuable features:
Get
your FREE credit score and more! 
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