Bad Credit Home Equity Line of Credit
Poor credit will complicate the process of obtaining a home equity line of credit for a homeowner. A poor credit history may contribute to a low credit score.
What is the concept of a credit score? Credit scores range between 300 and 850. The Fair Isaac Corporation invented the credit score. Lenders who arrange for a home equity line of credit use the homeowner's credit score to determine the interest rate paid.
Homeowners with a poor credit score can pay a higher rate of interest. A credit score of at least 700 ensures favorable interest rates. Additionally, the credit score acts as a barometer of whether or not a lender can approve a homeowner's credit application. Credit cap decisions for homeowners are similarly dependent on the homeowner's credit score.
The credit score is calculated using the homeowner's previous credit history. In the United States, three distinct departments keep track of each consumer's credit line. Experian, TransUnion, and Equifax are the three credit reporting services. If a homeowner with a low credit score wishes to improve it, the homeowner must contact one of the three credit reporting agencies.
To resolve a history of poor credit and increase a credit score, it is necessary to challenge false allegations of debt. If the homeowner may establish that the money argument is bogus, the homeowner would have an opportunity to improve his credit score. This step should be taken if the homeowner intends to apply for a home equity line of credit and has a credit score below 640. Such a score would indicate poor credit.
Contesting a credit score is not a game of chance. A analysis of credit reports in the United States revealed that approximately 80% of those reports contained errors. As a result, a homeowner may have reason to doubt the credit score used to calculate the interest rate on a home equity line of credit.
A couple's credit score, or the credit score of a couple who are joint homeowners, is calculated using three credit scores from the individual with the highest income. This is the ranking the homeowner would boost. This correction will necessitate a written statement to each of the agencies mentioned above. These agencies will then contact the homeowner to determine if additional information is required. If the homeowner is fortunate, his or her credit score will improve and the interest rate on the preferred home equity line of credit will decrease
Once the homeowner has a good credit score, he or she may want to avoid re-entering the bad credit zone. This ensures that homeowners must stop spending beyond their credit limits.