RSS Feeds: Bad Credit Mortgage and how it Affects your Interest Rates
When credit lenders evaluate whether a person qualifies for a loan or not, they view the FICO score, and then calculate risk factors, decide credit limits, and decide on interest rates that are proportionate with the FICO score number. It’s about the overall number and not the individual items that have shaped that number and you have to keep this in mind when you are considering applying for a bad credit mortgage.
Not paying your Bills ON TIME equals 35% of your Bad Credit Score
Let me explain this better. If you are in charge of granting bad credit loans and you need to know what interest rate to charge your client, you will pull the client’s credit report and look at the number, say it’s 610, and therefore decide the person must pay the highest interest rate. That client with a score of 610 may never have defaulted previously on a loan or had any judgments against them, however for the last 3 years all credit card and loan payments were paid 30 days late ever month – the client has been a month behind for 3 years and although they always paid the bill, it was always late. Since 35% of the score is based on timely payments, the person has fallen in overall score, even though they may not really be a high risk client. So they get a bad interest rate.
Meanwhile another application has a score of 720 or 750 and this person had lots of credit problems 3 years ago but decided to clean up their record, make payments regularity over the last year and, despite having a judgment against them in the distant past has maintained satisfactory recent payments and so has managed to increase their overall score and qualify for a better interest rate. This may seem unfair if you are the person with 610 and not 750 pints, but you can use this 35% to your advantage to clean up your score and pay on time for a while and raise FICO to your benefit.
Getting the best Bad Credit Mortgage Interest Rate is in YOUR Hands
Since lenders do not always look at specific events that make up the total FICO score, but the number itself, you can increase that number by being smart and giving yourself some extra points just by satisfying a few creditors, making payment arrangements, paying all bills on time (even for just a few months) and thereby increasing your overall score without actually erasing bad credit history. Then when you apply for a bad credit mortgage you will probably qualify for a better interest rate.
This is something many people don’t know. They think their long term history creates a PERMANENT FICO number that never goes away, and that this number can’t be altered, when in fact that score changes month by month depending on your payment behavior. So before applying for a bad credit loan or bad credit mortgage or remortgage, help yourself to get the best interest rate by cleaning up small things that are within your power, and paying bills on time for a few months.
Remember: Bad credit mortgage rating is based on a constantly altering FICO score, and although you may not be able to alter your previous payment history or how much total debt you have to date, or for how long you have had a credit history, or erase the past entirely, you do have it in your power to greatly alter your score and allow yourself to qualify for more credit and get better interest rates when applying for a bad credit loan mortgage.
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