Can I Borrow Money From a Bank?

Written by Posted On Thursday, 25 June 2015 07:01

Any time you take out a loan or line of credit to make a major purchase, your lender is going to run your credit to see whether you are a good risk for a loan. Never is this more important than when you're purchasing a new home – one of the most substantial purchases most people will ever make.

But what is your credit rating, and why is it so important?

Your credit rating is represented by a "score:" a number between 300 and 850. The higher your number, the more favorable your credit. Credit scores are determined by the three leading credit reporting bureaus in the U.S.: TransUnion, Equifax, and Experian. Sometimes the number assigned by each agency differs, but they are usually in the same general ballpark. In order to qualify for a mortgage loan at a favorable interest rate, it's important to maintain good credit.

In order to have a credit score, you must first have a credit history. This could include credit cards, car loans, student loans, lines of credit, and anything else for which you have borrowed money. Your diligence about making payments on those loans or credit cards helps determines your credit. Other factors that affect credit are consistently late payments, missed payments, and any type of default on a loan that you might have in your financial history.

In essence, good credit is all about personal responsibility. No mortgage lender will see an individual with poor credit as a good risk for a significant loan. Lenders are in the business of making a return on the money the loan you, and if you have a history of failing to make payments on your debts, a lender or loan officer is going to be leery of taking a risk on you. 

To maintain good credit, it's important to amass as lengthy a credit history as possible. That history should reflect an ability to make expected payments in a timely manner. Your level of debt (including credit card balances) is also a component of your credit rating, as is your pursuit of new credit. For this reason, it's important not to have too many inquiries into your credit. Some people who might run your credit to assess your responsibility or riskiness include your landlord, your employer, and anyone from whom you have obtained a loan.

You are entitled to one free credit report each year. This report will contain information from all three leading reporting agencies. If you believe there is an error in your report, you can make an inquiry for more information about your credit calculation. If you believe that the report contains erroneous information, you should first contact the lender in question to look into the problem. You can also dispute the information contained in the report if it is mistaken.

If you have poor credit, the best way to boost your credit rating is to make payments consistently. It will take time, but it's important to be diligent about your debt management. If your finances are really out of hand, you can contact a reputable credit remediation service to help you manage your debt and get back on track.


If you're thinking about buying a home in the near future, it's a good idea to be aware of your credit standing and to speak to your lender about your loan eligibility. A little research up front can reduce the chance of an unpleasant surprise when you apply for a home loan.


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