Drug testing

How Creditors Measure Your Credit Rating

Creditors will measure your credit rating based on the following three main things.

  • Capacity

  • Collateral

  • Character

    The three "C's" show creditors your:

    • "Capacity" or income to pay the debt

    • "Collateral" or assets to secure the obligation

    • "Character" shows your compliance to repay the debt

    1. Capacity

    The very first question is whether you have sufficient income to repay the debt. Creditors will definitely check to see if your income exceeds your expenses so that you ca comfortably pay the debt. A creditor will then want to know:

    • Your income - from all sources

    • Your fixed expenses

    • Your other debts

    The amount remaining from your total net income, after deducting your fixed monthly expenses and other debts, is your capacity. If your net income is $3,000 a month and your total living expenses is $2,500, then your credit capacity is an amount that requires no more than $500 in monthly payments.

    If you now pay $400 a month for other credit obligations, then your remaining capacity is a $100 a month, and a creditor should extend you that amount of credit.

    There are three techniques that will allow you to maximize your income:

    • Increase your income

    • Decrease your expenses (easier to do than the first one)

    • Reduce your other debts

    2. Collateral

    A lender or creditor can be secured or unsecured. Secured lenders hold a lien against specific assets, such as real estate, an automobile, or boat. If you fail to pay, the secured lender can sell the pledged asset to recover debt owed. Secured lenders seldom loan more than the auction value of the collateral.

    Secured credit, is an almost guaranteed way to rebuild your credit. Even with poor credit, a lender may advance your credit if you ca secure the credit with a lien against some valuable asset. Many creditors extend credit entirely on the strength of the pledged assets.

    Other credit considerations are either ignored or carry comparatively little weight in the credit decision.

    What can you use as a collateral to secure your debts and rebuild your credit? You may be appreciably wealthier than you think. Add the value of your various assets (property that you own) and subtract any existing mortgages or lies against those assets. The difference is your equity or net worth in the asset.

    This is what you have available to secure a loan. Do not overlook any asset:

    • Home

    • Investment real estate

    • Stocks, bonds, mutual funds,

    • Automobile

    • Boats, planes, recreational vehicles

    • Notes and mortgages due you

    • Art, jewelry, antiques

    • Pensions, IRAs, and Keoghs

    • Royalty income

    • Income from trusts

    You may have other assets to pledge. The point is that collateral gives you a borrowing power approximately equal to your equity in your assets. Regardless of your credit history, if you have collateral worth a solid $100,000, you should be able to borrow close to that amount.

    3. Character

    Creditors next consider your character. How important this is depends upon the type of credit, and who your creditors are. Asset based lenders rely chiefly on collateral, and they are less concerned with your character than are unsecured creditors who can only rely on your prior reliability for honoring your obligations.

    When creditors check your character, they basically look at how you satisfied your past obligations. Meaning they want to know:

    • How many credit defaults have you had?

    • What was the reason for the defaults?

    • How recent are they?

    • Do you own your own home?

    • If you rent, for how long have you rented the same apartment or house?

    • Do you have a checking account?

    • Do you have a savings account with regular deposits?

    • Do you have a payroll savings plan at work?

    • Do you have a telephone in your own name?

    • Do you have a criminal record?

    • Have you filed bankruptcy?

    Positive answers to these nine questions will often offset an otherwise negative credit report. Basically your credit character boils down to your credit history in the past. In the eyes of creditors, if your past credit character is good, there is no reason to believe why your future won't look promising.

    About The Author

    ? Copyright. http://www.deleteuglycredit.com

    Omar M. Omar is the owner of http://www.deleteuglycredit.com. The website is dedicated to provide credit consumers with information about their credit right and how to dispute inaccurate information on their credit report. Omar M. Omar is also the author Of "The Credit Repair Bible" book.

    You have permission to publish this article electronically or in print, in your Newsletter, on your website, or in your E-Book, as long as the author's Resource Box is included with the article.

    omar@deleteuglycredit.com

    limousine chicago service
    In The News:

  • Good Credit -- Essential for the Prospective Home Buyer

    Credit is a funny thing. It can be a useful... Read More

    The Hitchhiker?s Guide To Insanity

    A new sickness is plaguing the UK called Denial. Denial... Read More

    Debt Collection Agencies

    Debt collection agencies are often a viable option for receiving... Read More

    Which Business Credit Cards with Reward are the Best?

    Thinking of applying for a credit card with a reward... Read More

    Have You Checked Your Permanent Record Lately?

    As a young student I feared getting bad grades because... Read More

    Teaching Students To Keep Out Of Credit Card Debt - The Parents Role

    Parents have the full responsibility for their children and their... Read More

    Credit Cards or Store Cards - Which Is Better?

    Introduction In this article, a presentation is made of the... Read More

    ChexSystems: Alternative Options for People Whove Been Checking Accounts

    Individual banks elect to become members of ChexSystems, and to... Read More

    The Next Person With Credit Problems Got Their First Credit Card Today!

    One of the focus areas of my information is the... Read More

    5 Surefire Ways To Eliminate Credit Card Debt

    Do you have enormous credit card debt? You are certainly... Read More

    What is a Bad Credit History?

    A bad credit history can sometimes seem like a curse...... Read More

    Building Business Credit

    Most businesses want to be able to borrow money when... Read More

    Identity Theft - How to Protect Yourself

    "Like the tan? I got tons of sun on that... Read More

    7 Consumer Credit Laws You Should Know if You are Trying to Repair Your Credit

    There are seven consumer credit laws you should be aware... Read More

    Addressing Bad Credit Card Debt

    Spending HabitsSo you've just got your credit card. The first... Read More

    A Cure for an Ailing Credit

    Credit has become a much-used word, thanks to the various... Read More

    4 Steps to Creating Good Credit

    As a consumer you've learned the importance of establishing a... Read More

    Annual Credit Report and Free Annual Credit Report

    Getting an annual credit report review has been the advice... Read More

    Convenience Can Be Costly

    You've just opened your credit card bill and attached to... Read More

    Learn The Truth About Identity Theft

    Identity theft is the fastest growing crime in America, according... Read More

    How To Survive In A Plastic World, Qualifying For Credit Card

    Let's face it, having credit is no longer a choice.... Read More

    Taking Control of Your Credit History

    Your credit history is important; in fact, in this day... Read More

    ChexSystems: Who They Are and How it Affects You

    ChexSystems is a company that maintains a subscriber membership service... Read More

    Credit Cards - A Blessing or a Curse?

    Owning a credit card can be quite an advantage. Whether... Read More

    Avoiding ID Theft and Credit Fraud

    Article excerpted from the new book, "How to Do Space... Read More

    induction cobra head induction shoebox Pete's produce ..