What is a Good Credit Score?

The majority of the general public doesn’t understand how their credit score is calculated, much less what a good credit score is. Generally speaking, one has to establish a record of timely payments and available credit to increase their score. Higher credit scores will enable you to finance more expensive items such as homes, cars and qualify for most credit cards.

Credit scores range from 350-850. It is rare to see credit scores above 800, just as it is rare to see credit scores below 500. This should provide insight as to how broad this scale is.

Most people with a credit score of 700 or higher will be able to finance whatever they wish (assuming there are no outstanding collections, judgments/garnishments, bankruptcies, etc.). When applying for a mortgage, this score also assumes that the individual has everything else in order, such as: income, cash assets or seasoned cash reserves in the bank (typically a two-month average balance), a limited amount of liabilities (or low debt-to-income ratio), and employment for two years or more in the same industry for the purpose of proving a solid or sustainable income.  When applying for a car loan sometimes requirements are less strict.

It takes time to be able to achieve a credit score at the 700 level or above. Typically, to obtain credit, you must be 18 years of age. At this point in life one has not established any credit. To establish credit, it helps to maintain a good record of payment with utilities companies and obtain a credit card or two. A friend of mine recommended that credit score could be increased by obtaining three credit cards, charging $100 to each of them and paying them off using the minimum payment every month for 12 months or so. This exact strategy, however, explains the general principle of how credit is established.

Credit takes time to build and to repair. Most people starting to build credit in their late teens won’t see a 700 credit score until they’re 25. Repairing credit is much harder with regard to increasing score because many times the damage has been done. The hassle of paying off collections/judgments and then getting the paperwork to the credit bureaus and then, on top of that, having to wait for them to update the report can be difficult to tolerate. Some people opt for credit repair agencies to help them. While this can be a convenience in a difficult situation, it can counter-act an increase in your score if the bureaus catch wind of it.

A reduced credit score can drastically affect your ability to obtain a loan in the event you would need one.  If the score range is say 620-680, you’re likely going to get a much higher interest rate than if you had a score of 700+.

W. Paul Stogner

The Way Stated Income Loans Work

Simply speaking, the stated income loan requirements will not ask for any document that will serve as evidence of the income indicated in the application form.  Now, to define the stated loan, they are those lending instruments that will help a person who needs to fund a mortgage.  Due to the current mortgage rates in the market, some people will opt to get the debt instead of applying directly to the financial institution for the loan.  This way they avoid those long processing and documentation requirements they cannot meet.  Of these needed prerequisites, the income will be the one that will be

The stated loans will allow the potential borrower to give an estimate of the monthly gross income.  In addition, some lenders will ask from the borrower a list of assets they hold in case the loan will get into a default.  As part of the agreement for the application, the lender will promise not to ask from you any document that will evidence your income. However, there are some institutions out there who will do some information verification by calling the employer to check of you do work there.  On other times, they may request a letter from your accountant stating the business profits.  This is important for many lenders as the job title will be the determinant factor whether the income stated will be in the range for that industry.

There are rare cases when the over estimation for the debt has been discovered.  Once the lender has learned that you have stated profits that are way beyond your earning capacity, the debt application will be denied.  In addition, there are institutions that will be asking the borrower to fill up an IRS 4506 Form.  This will act as an authority to the lender to conduct some investigations to the tax returns of the business or the person applying for the loan.  The history for the returns requested will be usually around two years or more.

In addition, the stated loan will have a higher interest rate compared to the other loan types in the market.  Plus, it has been noted that these lenders will ask from the borrower a larger down payment as a sign of goodwill.  Credit scores and ratings will also become a factor in the debt application.  The higher the score of the applicant based on the payment history of other loans will mean a higher chance that his application will get approved.