There are two steps you must take before you attempt to improve credit rating and credit worthiness.
Before applying for any credit, check your credit report to be sure that there are no negative marks on it. Even if you are new to the world of credit, or strongly believe that your credit rating is very good already, check your report to be absolutely certain.
Negative marks tend to show up more consistently than positive marks because creditors hire credit bureaus to prevent them from making bad loans.
Naturally, creditors and credit bureaus are more likely to seek out and report negative information, so you must first repair the negative marks and then begin to build a positive credit history.
Score yourself. Most lenders use a scoring system to establish the level of your credit ability. A loan officer or board will disqualify applicants who do not achieve a minimum number of points on the credit scoring test.
The number of points required is predetermined by the lender’s policy making committee. Then it is given to the officer, who uses it as a guideline in determining whether a loan should be approved.
Lending institutions utilize standardized scoring systems to make the process of approving loans more objective. For instance, banks know from experience that individuals at a certain salary level can handle a combined credit line of a certain amount on their credit cards.
Questions on the scoring test clearly reveal your salary level and patterns of living.
Be sure that prospective lenders see only positive things being reported about you. In addition to having no negative marks, you must have a positive credit history that establishes your track record.
While the loan officer’s personal judgment of the borrower is important, banks try not to rely too much on the banker’s subjective evaluation of the borrower. By following the objective standards set by the scoring system, the banks make fewer bad loans.
Although each lender has its own system and asks its own questions, the key questions are universal. By knowing precisely what lenders are looking for, you can identify areas in your credit profile that need improvement, pinpoint strengths and adjust your credit image.
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