Most people need a mortgage for buying a home. Mortgage lenders generally lend money only to people who have a favorable credit report. A credit report is a statement of a persons creditworthiness. It is a statement of any past loans the person has taken, the punctuality of the loan repayment, length of credit history, types of credits used and recent credits obtained. Banks and lending companies use credit checks to determine how risky a person is as a borrower and whether he/she qualifies to receive a loan or not. A good credit report would make the loan process easier. Some lenders may also reduce the interest rate on the mortgage. The bank or the lending company does frequent reedit checks. The reports can also be obtained from credit rating agencies such as FICO, Beacon, or Empirica. People with bad credit are those who have a poor rating on their credit reports or who have declared bankruptcy in the past. These people generally find it difficult to get a loan for buying a home. However, these days there are some lenders who are providing loans to such people. The loan would be based on other factors such as the loan-to-value ratio (the ratio between the debt and the value of the collateral), the debt-to-income ratio, and the affordability. Some people who are willing to work towards fixing their credit record are also eligible for these loans. This involves paying their bills on time, clearing up past loans and increasing cash reserves. People with bad credit can get a loan for a higher rate of interest, but it makes sense to first clear up the credit record to qualify for a loan at a lower rate of interest than pay extra interest to the lender. Some lenders charge very high fees and points. |
