How is Your Credit?

How do you know if you have bad credit? How bad does it have to be to be considered bad? Where's the line between fair credit and bad credit? These are all good questions but if sometimes it's hard to know the answer because it varies from one lender to the next. If you've missed payments or defaulted on other loans, there's a good chance your credit could be considered "bad". The first thing any lender will do is look at your credit history.

Your credit payment history is recorded in a report maintained by consumer reporting agencies or credit bureaus such as Equifax, TransUnion and Experian. Your credit record contains information provided by businesses and public records - information such as court documents, property taxes, residence, income, debts, and credit payment history.

When you apply for a loan, lenders use a scoring system of their own or one provided by the credit bureau agencies, to help determine whether to give you credit. This statistical program uses information provided by the credit bureaus to help predict your credit worthiness.

Credit history is important and affects all of us at some point in our lives. First of all, potential lenders look at it to figure out how likely you are to repay a new loan and how much effort will be required on their part - they don't want to have to spend time reminding people to pay their loan. When deciding whether or not to approve a loan, a lender will factor in your credit worthiness and your potential risk. They generally take into account: (1) how promptly you pay your bills; (2) how much credit you've had and what kind; (3) how much you owe other creditors; (4) your income and (5) your employment and your residence history.

Every lender has a different set of criteria that they use to determine your credit worthiness. When you apply for an auto loan, the lender will look at your credit report to determine whether or not to give you a loan, and also to determine what interest rate you get if you are approved. More specifically, lenders will look at the FICO credit score to determine your credit risk and use that score to determine if they want to give you a loan, and what interest rate to charge. The best way to know what to expect when you apply for a car loan is to get a copy of your credit report. The quickest and easiest way to do that is to request a free credit report online.

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