At some point in many of our lives, bad financial decisions are made that can affect your credit rating in a negative way. A rating of less than 580 is considered bad credit (some may say terrible credit), which limits the options of getting loans and other forms of credit available to you. Nobody wants to live their entire life with such a bad credit rating, certain measures may need to be taken to rectify the situation. One remedy for a negative rating is to apply for a bad credit loan. Believe it or not, there are institutions and individuals that specialize in giving out bad credit loans to persons with negative credit ratings.

The first step is to meet with a financial adviser and ascertain exactly how your credit rating is, so you can have a clear picture of the status and the options available as far as bad credit loans go. It is prudent to borrow what can be repaid quickly without further affecting the credit rating. A common form of bad credit loans, are loans for , computers, or jewelry. Most pawnshops will accept these items against a loan that has to be paid back with interest within the stipulated time frame. If the full amount is not repaid by the expiry of the said period, then the pawnshop can sell the item to recover their investment.

Another form of a bad credit loan is a loan against a car that you currently own. Proof of ownership (car title) has to be provided and left as collateral with the lender. It is usually common to be offered an amount a little less than the true value of the item used as collateral. Some lenders will also give bad credit loans against pay slips as long as the employment of the borrower can be verified. These loans are also known as payday loans. Payday loans are where the borrower agrees to repay the loan when they receive their next paycheck.

In most cases financial advisers will recommend that the borrower get alternative forms of bad credit loans instead of payday loans. Over the years, payday loans have got a bad rep due to high interest rates. A person with a low credit score can get a bad credit loan with good terms when they get someone with a good credit rating to co-sign with them. A co-signer should be a person that is well known to the borrower so that the borrower will not default on purpose thinking that because they know that the other person, they will cover the loan amount. Pay your bills, and you will be in good shape!

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What are they?

Credit inquiries happen when a potential creditor requests a copy of your credit report to determine credit worthiness.

Inquiries remain on your credit report for a total of two years. FICO scores only consider inquiries from the last 12 months to be important. FICO scores do a good job of distinguishing between a search for many new credit accounts and rate shopping for one new account. Meaning if you are purchasing a home and are trying to obtain a loan FICO understands that you may have your credit reports looked at many times in 1 month.

Inquiries may be removed; however you will have to go directly to the creditor to get these items removed. At one time you were able to dispute through the Credit Agencies, now they are making it harder to remove. Equifax will still remove inquiries but you have to have a good reason for the removal.

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Getting a home loan or refinancing your existing home will now require a better FICO score than before. The FHA is trying to limit it’s exposure, and our nation’s, to bad debt and therefore, implementing much more tighter controls for lender approvals. You will find below the four major topics of the new FHA rules that are set in place.

It’s anticipated that these rules will go into effect in the spring or early summer of 2010.

Higher Insurance Requirements – This change requires that an upfront mortgage insurance premium required of a borrower would be raised from 1.75% to 2.25%.

Larger Down Payment – Only those borrowers with FICO scores about 580 would qualify for the low 3.5% down payment. Those borrowers with a score lower than 580 would need a down payment of at least 10%.

Lower Seller Concessions – This is the money returned to a borrower in exchange for agreeing to a higher home sale price. This seller concession would drop from 6% to 3%.

Higher Minimum FICO Score Requirements – In addition to needing a minimum FICO score to qualify for the lower down payment option, it may be difficult for a borrower to even begin the process with FICO scores below 600. This higher FICO score requirement is not limited to FHA loans, but is being adopted throughout the mortgage industry.Having said that, what was once a fair FICO score may now only be considered a poor score.

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CONSUMER CREDIT FILE RIGHTS UNDER STATE AND FEDERAL LAW

You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ‘credit repair’ company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for up to 10 years.

You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee for obtaining your credit report. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next 60 days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud.

You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. The Credit Repair Organization Act prohibits deceptive practices by credit repair organizations.

You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the date you signed it.

Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate.

However, mistakes may occur.

You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then re-investigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau.

If the credit bureau’s reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you.

The Federal Trade Commission regulates credit bureaus and credit repair organizations.
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The question often asked is:

“I have a lot of good credit. Will my good credit cancel out my bad credit?”

Any amount of bad credit or bad credit entries on your credit report is devastating to your chances of being approved by a credit card company, a financial loan, or any company that extends a credit line to you. Most loan companies or credit lenders never actually physically look at your credit report or items on your credit report. A computer pulls your credit report, calculates your credit status, income, the amount of debt your owe, and stability. After the calculation of the a-fore mentioned items, a computer program then shoots out a status of ‘approved for credit’ or ‘denied credit’.

How does the credit calculation affect you?

Credit Card or Personal Loan

• Even a small amount of slow pay or a late payment will usually cause a red flag on your credit report for a credit card or personal loan denial.

Auto Loan or House () Loan

• The smallest amount of negative credit could cause the interest on an auto loan to shoot through the roof. Even a little bit of bad credit could cause you to not get approved for an auto loan, house loan, credit card or .

Credit repair is vital to consumers who want these & other finer things. Credit repair is the consumer’s defense.

Empower – Educate – Take Action

H & I Credit Solutions