A. THE PROBLEM
Credit scoring is taken into consideration by the majority of creditors. Each and every consumer who makes purchases using some sort of credit are impacted by credit scoring. Once an unclear concept, the credit score has become one of the most widely used tools for lending institutions. This concept began years ago, when local lenders developed a smaller system of accountability. Grocers and local merchants would report to each other if a certain person who bought on credit was paying their accounts timely or not.
In the State of Louisiana, there are over 4.5 million citizens. Of these 4.5 million people, a majority of Louisiana residents (fifty-two and a half percent) have debts that are past due or have an account collections.
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A low credit rating or bad credit report can negatively affect virtually every aspect of one’s life. Even creditors who take the risk of lending to individuals with lower credit will be impacted in the event of default and will have to absorb the loss of delinquent or unpaid loans. In a nutshell, if you use money, you will be impacted.
When a person has a lower credit score, they may be denied a loan or in the event that the loan is approved, the interest rate will typically be escalated immensely. If you are interested in purchasing your own home, you will most likely have to take out a mortgage. If you have excellent credit, you may be able to secure a low interest rate of around four percent or even less. This will make your monthly payments comparatively low. However, if you have bad credit, you might only be able to secure a loan that charges nine or ten percent interest, making your monthly payments much higher, and costing your thousands upon thousands of dollars over time. In the event of a mortgage
At the end of the day, credit shows true financial independence and having excellent credit can get you what you want and save you a lot of money in the long run with the possibly of lower interest rates. Credit is a universal number that landlords, lenders, finance company and even an employer look at to determine your
In this country, there are three major credit bureaus: Experian, Equifax and Trans Union. They offer information to lenders about a person�s credit score. The lower your credit score, the less likely you are to get credit. Each credit report comes with �score reason codes� to explain why your credit score is where it is.
For debt, it begins with a simple late or missed payment. These missed payments allow companies to punish card owners without discretion. With this, lenders hike up interest and payments on their customers for negligence, regardless of what their reason may be. Whether it was a tough month for the family or someone died and expenses had to be payed, lenders do not care one bit. From 2013 alone, student debt was at 1.21 trillion dollars, and mortgage standing at a whopping 7.9 trillion (Miller, R. K., & Washington, K. (2014). These loans also feed into why we as a country are in debt, which currently stands at seventeen trillion. These missed payments also greatly affect interest rates from lender companies. Companies wait for payments to come late, which allows them to impose fees and hidden charges that must be paid along with the delinquent payment. With increased rates comes...
Lenders loan money. They try not to give it away. Places that give it away are called charities. If you fall behind on your payments, you will learn quickly that banks aren 't charities. Lenders also like to look at your payment history. Some people pay every payment on time. Banks love these people. They are considered low risk. Their credit scores are high. Everyone smiles when they think about these people. Some people pay every payment. They 're just not really very picky about when they get it paid. Banks kind of like these people because they get their money and make a little extra from late fees. They create extra work for the bank employees, but at least they get more money for their troubles. Other people eventually pay the loan,
Your credit score is one of your most important financial attributes. Fortunately for those who are unsatisfied with their credit rating, there are plenty of options available. Improving your score is an attainable goal that everyone should aim for, even those who are content with their credit rating.
Cliff A. Robb and Deanna L. Sharpe began their article “Effects of Personal Financial Knowledge on College Students’ Credit Card Behavior” with clarification regarding the study and also a succinct historical introduction to the ‘invasion’ of credit card companies on college campuses. Their study was based on the analysis of survey data composed from 6,520 students at a grand Midwestern University. This study revealed that financial knowledge was a compelling factor in the credit card decisions regarding college students.
Credit cards have a history stemming back to the mid 1900's, when there were two types of cards, both of which are still around, the card for specific stores, such as Sears, and the card for the occasional convenient spending when you didn't have the money you needed right away. The difference, however, between now and then is that only the extremely financially stable were using the latter of the two cards. The cards, such ...
You become so low on money you are trying to find anyway to get money. Your credit score can become low from not paying off things you took a loan out for. Think of a scenario like this. Say you took out a student loan for college and you are so low in money now because of that loan. What happens if your car breaks down and you need another one? You might need to take out a loan for that car to and you won’t be able to pay off that either because your so low on money. Maybe you might not get that loan because of that student loan you took out for college. You can even lose things like your house because your so low on money the bank knows you won’t pay anything back to they take the value of the house and sell it to pay off the loan. I know what your thinking. What if I pay off that student loan, Would everything be back to normal? Not necessarily. Your credit score will be low from not paying off your student loan off in time and you won’t be getting anymore loans for a while because the bank knows you won’t pay back anything on
Statistics suggest about 32% of consumers are going to over estimate the rating on their credit, while only around 4% are going to under estimate the rating on their credit. Ones who will overestimate the quality of their credit are most likely less informative about finances overall, and will be more likely to have learned about their financial knowledge, unfortuanately, the hard way. Also the consumers who are going to overestimate the ratings of their credit will be less likely to properly budget, effectevely save their money, or learn to invest it often. With another example, in 1999 it was found that about 40 percent of mortgage borrowers didn't understand what the interest rates that were associated with their loans were.
I. Introduction: A. Attention Getter: How many of you have credit card debt? An average
Finding a mortgage can be just as difficult as the home itself. There are more mortgages than there are possible homes. There are many factors that determine the amount of the mortgage and the interest on it. Credit bureaus such as Equifax, TransUnion, and Experian determine if the person has enough credit for a home loan. An acceptable credit score ranges from 620 and up for a mortgage. This is a very important facet because a person’s score can change the rate of interest. Other important factors that decide interest rate are the types of documents presented to the mortgage lenders.
Suffice it to say that properly managed credit card use may improve your credit rating, and responsibly using XXXXX may help you improve your credit rating with your credit card.
Buying a home is more complex then most think. A purchaser of a home doesn't pay in cash when buying a house. If that were so, then nobody would be able to afford one. A potential buyer must get a loan. The bank doesn't lend their money to just anybody, so there are prerequisites before a buyer should consider buying a home. The potential buyer must have enough money for a down payment which is 3% to 20% of purchase price, a steady job with for at least two years or more, must have a decent credit score with at least a 640 or better. That is standard for the market. (1) The credit score is based on the FICO score. FICO stands for, Fair Isaac Corporation, a company that has been in business since the early 1950's and monitors consumers' credit ratings and put a scoring system on it. (2) Conventional loans are usually financed up to eighty to ninety percent with a down payment required of ten to twenty percent. The potential buyer must also have a debt ratio not exceeding 28/39 of their income. The first number 28 refers to your new mortgage payment that cannot exceed 28% for your gross combined income and 39 refers to your mortgage payment plus revolving and installment debt as well as taxes and insurance cannot exceed 39% of you total combined gross income (3).
Credit plays a significant role when it comes to consumer spending, but can have a significant impact if misused. It doesn’t take much for consumers to get in over their head with the overuse of credit, credit debt can quickly mount if left unchecked. According to Stinson (2016), “The road to a credit card debt pileup is often paved with spending that seemed like a good idea at the time. But too many well-intended moves can lead you into a financial ditch and ruin your credit” (Stinson,
...gency (CCMA) (2012), the main reasons people fail to pay a debt were poor financial planning (25%), high medical expenses (22%), business failures or slowdowns (15%), loss of control on the usage of credit cards (13%), and loss of jobs or retrenchments (10%). Therefore, Lea, Webley and Walker (1995) found that debt with economic, social and psychology factor are closely related.