Know the Score Before Applying for a Loan

Filed under: Lending, Personal Finance, Young Adults, Adults, Retirees

Peter and Miriam were ready to trade up to a larger home to accommodate their growing family. They applied for several loans, searching for the best interest rate, but found that each time they were offered a rate, it was higher than the previous one.  When they checked with their bank, the loan officer told them their credit score was too low to qualify for the best rates. Whenever you apply for credit, your potential lender usually bases its decision, in part, on your credit score. Essentially a rating system, your credit score is meant to measure how likely it is that you will pay back the loan. There are hundreds of credit scoring systems, but the most commonly used system was developed by Fair, Isaac and Co. (FICO).

Understand the Numbers

The three major credit bureaus (Equifax, Experian and TransUnion) and FICO have combined forces to provide your credit score along with your credit report, for an additional fee. You can also access your score online atwww.Myfico.com, also for a fee. Once you've received your score, how do you interpret it?  Each lender sets a range of numbers for what it considers good and bad credit scores.  Generally speaking, however, a score of 700 or above is considered worthy of the best rates.*  Lenders usually consider 650 to 699 to be a good score, while 600 to 649 could be considered slightly below average and will probably trigger higher rates.  Consumers with scores below 600 will probably receive the highest rates or have their loan request denied. 

Improve your credit habits

There are no quick fixes for a bad credit score, but that doesn't mean that you can't take steps to improve it. The two most important steps include consistently paying your bills on time and keeping your outstanding balances low on credit cards and lines of credit. Earthmover practices "Earned Rate Lending".  Members that received our lowest rates have earned that privilege. 

Begin building your future 

Having little or no credit history can be just as damaging as having too much credit. You can begin building an excellent credit score by applying for our credit card today. We offer a variety of cards to meet your needs with competitive interest rates and a number of convenient ways to apply. Visit our Web site, www.decu.com, apply over the phone or visit your nearest branch to apply in person.

*Source: Money.com. ©2001 Inform News Service

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