The first step in applying for a loan as an informed consumer is to know your credit score. Your current fiancial situation directly affects your ability to obtain a loan as well as partially dictate your financial freedom in the future. You must be prepared before you apply for a loan, and discovering your limitations and will predict what type of loan is realistic and right for you.
To more successfully obtain approval for your loan, it is important to know your credit or FICO score before you apply. The accuracy of your score is just as important as learing your score itself. Appropriate reasearch will prevent any unwelcome surprises at application time as well as allow you to correct any errors that may effect your approval.
It is important to understand not only what your credit score is, but how it is calculated before actually acquiring it.Your credit score is a number derived from a pool of information consisting of bill payment history, how many and what type of accounts you have, any record of late payments, collection actions taken against you, the age of your accounts, and all your outstanding debt. Creditors then apply a statistical program to your information as well as the information of your financial peers. Your actual credit score number is then extracted from a system that awards points for each factor you have that helps predict your likeliness to repay any loan or credit given in a timely manner. Through this system, the more points you are awarded, the better your score and the better your probability of receiving approval.
There are three major credit-reporting agencies through which you can access your credit information. They are known as Equifax, Trans Union and Experian.Because not every agency carries identical reports, it is important to obtain a copy from each one. As stated before, accuacy is imperative.
In more recent years, lenders have started relying a number called your FICO score when considering you for credit. Similar to the information obtained by Equifax, Experian or Trans Union, FICO is mathematically generated based upon your credit report. This generated number is then compared to millions of other consumers resulting in a very accurate assesment of your financial strenght and competence. Just as your credit score, the higher your FICO score, the better your chance of earning loan approval.