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:

  • SuperCharged Secret 5, Credit Card Utopia

    LIVING IN CREDIT CARD UTOPIALet's just take a brief moment... Read More

    10 Signs You May Need Credit Counseling

    Debt management programs can be of real help for people... Read More

    Warning: Free Credit Report Imposter Websites Springing Up on the Web

    A recent amendment to the federal Fair Credit Reporting Act... Read More

    Saving Money: Quick Cash, High Cost

    I didn't think it was possible. But it is. Folks,... Read More

    Can You Acquire Good Credit Overnight? You Bet

    Your credit file may not reflect all your credit accounts.... Read More

    Credit Card Tips

    Here are some useful credit card tips for you to... Read More

    What is on Your Credit Report?

    Your credit report is a very important piece of the... Read More

    Cash Advance ? How Does It Work?

    If you want a cash advance or a payday/paycheck loan,... Read More

    How To Get a Low Interest Credit Card

    Consumers often have the first credit card that they ever... Read More

    Credit Counseling: Could it Work for Me?

    In the face of financial hardship, many seeking a responsible... Read More

    The FICO Score Misconceptions

    There are many misconceptions about credit scores out there. There... Read More

    Discover the Parts of a Credit Report and What They Mean

    So you ordered a copy of your credit report to... Read More

    My Student Credit Card Adventure

    And some practical advice too!My first credit card?I remember my... Read More

    Simple Identity Theft Protection

    How many of you bank, shop, or transact other business... Read More

    Understanding Credit Report Score

    Understanding credit report scores is important when you see your... Read More

    Credit Cards Can Help You Get Out Of Debt

    Your credit rating / credit score is based upon how... Read More

    Minimize your Risk for Identity Theft

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

    Your Credit Rating and How To Check It

    There is a lot of confusion surrounding UK credit ratings,... Read More

    Credit Card Traps: How To Spot Them On The Spot!

    They arrive in your mail - a conspicuous looking mail... Read More

    Identity Theft ? Additional Protection for Soldiers on Active Duty

    Congress passed the Fair Credit Reporting Act several years ago... Read More

    Choosing the Right Credit Counseling Agency for You ? Some Tips Part 2

    Credit counseling companies come in all shapes and sizes. Whether... Read More

    The Hitchhiker?s Guide To Insanity

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

    Credit Scores and Loan Applications

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

    Credit Cards and How To Choose Them:

    It may seem like a simple question but its important... Read More

    Myths and Truth about Credit Scoring

    Credit score is the key factor determining approval of almost... Read More

    street light materials white led light Pete's produce ..