If you live in the United States and seek a mortgage but have poor credit, the main element that will affect the interest rate, the credit limit you are given and the actual possibility of being accepted, will be a number – the number that corresponds to your FICO score. If you are applying for a bad credit mortgage refinance loan and your score is low, you may not be in a position to negotiate a good interest rate; you may be happy just to get the mortgage or to be refinanced.
Before applying for a for a bad credit mortgage, you will want to better your chances of approval any way possible and I will address some of those issues in this article. But first….
What is a FICO score and who stores this personal information?
Fair Isaac Corporation, that’s what FICO is short for, and they have been handling large and small credit histories for companies and individuals since the late 1950’s. However, since the 70’s, this corporation has received reports from the primary consumer credit reporting agencies that collect individual credit information which are: Equifax, Experian, and TransUnion.
The reports from these bureaus are then analyzed and the different systems of rating the credit information is then amalgamated into one number that represents an overall picture of your credit history, total actual debt versus possible credit, timely or untimely payments reports, variety of credit types and everything all your lenders and credit cards and banks have to say about you.
High Risk or Low Risk
This number is then used to determine if you are high risk or low risk to future lenders and will also determine what interest rates you can qualify for and how much capital you can borrow on assets or property or based on income and past records of payments. There is a final secret algorithm that no one knows except FICO insiders, but basically, if you have a number closer to 850 (than to the lowest score of 300) you will be better off. You may want to read a bit more about how your score is collected and rated in the book called, Your Credit Score, Your Money & What's at Stake (Updated Edition for 2009) How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston
Repair Bad Credit on Your Own
A bad credit mortgage can still be obtained if you have poor credit, however you will have to pay an interest rate that may be very high and your credit limits will be low. Find out how to repair bad credit on your own and increase your FICO score and qualify for better rates and more credit.
