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.


    limousine chicago service
    In The News:

  • How to Avoid Credit Card Late Fees

    Everyone hates late fees and being late will cost you... Read More

    Credit and Banking Money Saving Services

    The first rule when applying for banking and credit services... Read More

    What You Need To Know About Credit Cards

    What is a credit card? A credit card is... Read More

    Credit Damage: Getting Compensated for Your Loss

    Until recently lawyers for victims of credit damage had little... Read More

    Credit Repair Kit Sound To Good To Be True? It Is.

    A lot of people have bad credit. It is unfortunate... Read More

    Choosing The Credit Card That Is Right For You

    Credit cards represent an important part of our financial lives.... Read More

    What Is A FICO Score?

    A credit score is most commonly known as a FICO... Read More

    10 Tips To Prevent Credit Card Fraud

    Imagine opening your credit card statement one morning and discovering... Read More

    Will Inquiries Lower Your Credit Score?

    What are inquiries?When you apply for credit the creditor or... Read More

    Credit Reporting: How Does It Work?

    In order to determine a consumer's credit worthiness, creditors and... Read More

    All About Balance Transfers

    What is a balance transfer?A balance transfer can be explained... Read More

    Maximizing Credit Card Rewards

    In their quest to get you to sign up for... Read More

    Figuring Out the Ever Nebulous Numbers Called Credit Scores

    Credit Score FactorsThe information contained on our credit reports affect... Read More

    Looking for that Low interest Credit Card?

    If you have been shopping around for a Low Interest... Read More

    Is Your Credit Score Costing You Money?

    Most of us want a good credit report to obtain... Read More

    Choosing A New Credit Card

    1. Choosing A new credit cardThere are many reasons for... Read More

    How To Read Your Credit Report

    The Fair and Accurate Credit Transactions Act, signed into law... Read More

    How To Use Your Credit Card For Ultimate Financial Advantage

    Using a credit card wisely is an important step in... Read More

    Credit Scores and Loan Applications

    Keep Your Credit History Clean - Remove A Negative Credit... Read More

    What Are the Most Common Ways to Commit Identity Theft or Fraud?

    It's the number one source of consumer complaints at the... Read More

    7 Ways To Squash Identity Theft

    It is the scourge of our age: identity theft. Thieves... Read More

    Credit Cards for Home Business

    It is wise for you to have a company credit... Read More

    How A Prepaid Debit Card Can Help You Rebuild Your Credit

    Consumers today are up to their eyeballs in debt. And... Read More

    Identity Theft ? Who Would Want Mine?

    With all my bills who would possibly want my credit?... Read More

    Using Credit Cards Wisely

    "I think money was stolen from my card" or "I... Read More

    high bay lights led light bulbs for sale Pete's produce ..