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Not everything in life can go the way we want to. Work, emotional and financial problems can lead to bad credit which leaves people in a complicated position in life. If you have found yourself in this kind of a situation you are probably well aware that you can’t get a personal loan because of your bad credit, you can’t even get a mortgage. So, should you give up on the idea of getting a mortgage just because the rating of your credit is so low?

No, absolutely not. There are still a few things you could do. Even at your lowest rating point, there are still chances that you would be approved for a loan. It is important that you do not give up and constantly push to achieve your goals.

Nevertheless, we are here to tell you what kind of adjustments you could make in your life to improve that rating and increases your chances of earning that loan.

What is a Credit Score?

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Before you can do any kind of financial adjustments in your lifestyle, you will first need to understand a few things about this rating and how you lose or earn points. In the United States, the range of these ratings is from 300 which is the lowest point and 850 being the highest point. The higher your rating goes, the more positive impression banks and lenders will have of you.

It helps them analyze your background and previous financial situation without having to dig through every information they have on you and asking you for documents that date 10 years in the past. The higher the score, the bigger the chances that you will get the mortgage you have been asking for. But, the score does not only dictate whether you will or will not get the loan. It also dictates the interest rate. Naturally, you will want the lowest interest rate as possible and to do this you will have to increase your credit rating.

How can I check my score?

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There are several ways you can get a report about your credit. The first and most accurate way of doing this is going to one of the three consumer credit reporting agencies such as Experian, TransUnion, and Equifax. Of course, you will need to pay a small fee, but you will get detail information about your financial history and everything else you will need to analyze your rating.

If you do not feel like wasting time going to these agencies and giving them money, you could also find one of the many online websites that provide you with a report. Keep in mind, the report won’t be as detailed as getting it from a reporting agency, but it still might be useful to you.

How will my rating affect the loan?

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A bank or a lender goes through your score to decide whether they will approve your application and how much the interest rate should be. The best interest rates are meant for those who have a score between 750 and 850. If yours is below 600, that means that the rates will be higher and the chances of your loan application to be accepted will be much lower.

Although, there are some lenders out there that give out mortgages to everyone but at the cost of very high-interest rates. It may be harder to pay back the debt, but at least you will get the money. It is up to you to decide whether the risk will be worth. If you are looking for an experienced mortgage company that offers low rates, check this.

When is a score too low?

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There isn’t really a clear answer to this question, because different lenders have different rules when it comes to lending money. Some prefer to work with people with a higher score, others with lower. Some like to play on low risk and low-interest rates while others like a high-interest rate but combined with higher risk too. So, do the research and find a company that can satisfy your needs.

Should you first improve your score or get the mortgage?

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This is a question that a lot of people are asking themselves. It is true that you probably need the money as soon as possible and not in a few months or years in the future. You will have to do the analysis by yourself and come to the conclusion which path you should take.

We recommend considering improving your rating first because it can be changed quite easily, especially when you are between the 500 and 650 range. Take the necessary steps to increase it and you might save yourself thousands if not tens of thousands of dollars. Increasing the score for just 20 or 30 points, you might cut the interest rate by half which is a huge improvement.

Older Homeowners Have More Options

Source: www.latimes.com

Some overlook special mortgage programs which are age driven such as the home equity conversion mortgage a special loan insured by the federal government made available to those age 62 and older. The reverse mortgage requires no minimum credit score making qualifications quite easy for those with a significant amount of equity in their home. A rule of thumb is approximately 50% equity required to qualify for a reverse mortgage. Interest rates are comparable to conventional loans so be sure to compare both well mortgage shopping in your older age. Try the free Calculator found at ReverseMortgageReviews.org for an estimate of your eligibility.

What can you do to improve it?

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So, if you decided that you actually want to improve your credit score, you will need to follow a few guidelines.

The first and easiest thing to do is to pay all of your bills on time. Sure, it sounds simple enough, but you would be surprised just how many people are forgetting about their bills. Do not leave any payments behind and you will notice just how fast your rating will rise.

The other thing you could do is to pay any pending debts. Of course, not everyone has the money to pay back an entire debt in just one payment, but if you have any pending debts that are only a few thousand dollars, you could pay those back. This may bump your credit score by ten or fifteen points which is something that you definitely need.

Another thing you should consider is canceling the credit cards you are not using. We are not sure why, but having multiple cards and multiple bank accounts can actually lower your rating. You should also consider adding yourself to the electoral register.

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