Mortgage Loans – Mortgage Loan

We all know that having a good credit score is very important to get any type of secured mortgage loans. The lender checks the borrowers credit report to check the borrowers credit affordability. If you have better score then you can get approve the loan with better rates and terms. So all of us try to improve our credit score or keep it in a better condition but do we all know what are things that affect our credit score badly? If we can avoid those things then we can have fairly credit.

• Defaulting in Payments: The first and fore most thing is defaulting on monthly mortgage payment. If you default on your mortgage payments or any other payments, that shows a negative impact on the credit report. So it is better to pay all the bills on time and if you can make payment of your bills that has certainly have good impact on the credit score and helps to improve.

• Regular Late Payments: We have already discussed that late payment a huge negative effects on the credit report and if someone makes constant late payments then his credit score is bound to go down.

• Charge Off: Some times borrowers are unable to make some payment and the lender charge off the due amount but this actually have huge negative impact on the credit report. If the person does not make payment on the charge off amount then sometimes other lenders do not want to give a new loan as they may think that the person will not be able to pay off.

• Closing down Old Accounts: Do not close your old credit card accounts and if you close your credit card account with some due balance then it will have massive negative impact.

• Judgment against you: If you credit report shows any judgment against you that means you have not pay off your bills and the lender has taken help of the Court against you. This also effect your credit score badly.

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What Happens During a Recession?

A couple different formal definitions exist for a recession. Here are a few popular ones:

• Suggested by economic statistician Julius Shiskin in 1975, a recession is when the Gross Domestic Product (GDP) has two down quarters (i.e. shows negative growth for two consecutive quarters). Another way to look at this is that our currency ends up buying less in other parts of the world.

• Another definition of a recession is when national unemployment rises one and a half percent in a year’s time.

• The National Bureau of Economic Research (NBER) has their own version that most economists like more. This involves a look at more factors than just the GDP or the unemployment rate. Real income, wholesale-retail sales, and industrial production also factor into whether they decide a recession is going on or not.

• Leonard Lauder of Estee Launder Cosmetics once put forth that lipstick sales could be a good indicator of a recession. The theory behind this was that shoppers would put off big-ticket purchases but placate themselves with the purchase of lower priced makeup. Therefore, if lipstick sales are up, we might be in a recession.

A recession is a slow down in the economy. However, it is more than that, a downward spiral with a negative feedback loop; a recession can take some time to recover from. Here is what happens in a recession:

• Something causes a problem for banks. Some form of over-speculation or crisis happens where they now cannot loan out money like they usually do.

• Small businesses cannot get loans to start their businesses.

• Business stagnates. New people are not hired for new businesses.

• Unemployment goes up.

• People get scared and stop spending as much money as they usually do. Credit card application and usage drops.

• Businesses fail and have to lay off people.

• Home values and mortgage applications go down

• After about a 10% unemployment rate, normal people start to get affected by the recession (i.e. not people living on the margins).

• People will start to look for recession proof commodities to invest in.

To help get out of a recession, governments will usually try a couple of things:

• promote interest cuts to encourage consumer spending

• make tax cuts to give people more money to spend

• increase money supply

• increase government spending

A very strong argument exists that excessive government involvement actually makes recessions last longer. The Austrian School of Economics, for example, advocates a laissez faire approach to the economy. They believe that government involvement is counterproductive to recovering from a recession. The Chicago School of Economics also believes in libertarianism as far as economics are involved.

Harry S. Truman, 33rd president of the US (1884-1972) was quoted in the newspaper Observer on April 13, 1958, “It’s a recession when your neighbour loses his job; it’s a depression when you lose yours.”

A credit score is the score associated with a person’s credit report. This score indicates how well a person has managed his or her credit in the past. Various methods to score a person’s credit report exist. However, the most commonly used score is the FICO score. FICO stands for Fair Isaac Corporation.

With a FICO score, the higher the score, the better the score is. FICO scores range from 300 to 850. A good score is anything 700 or above. This score is for the ideal credit consumer. They make their payments in time, they do not own that much debt, and they have demonstrated responsible use of credit for a long time.

A score below 600 will not rule you out but will probably get you higher interest rates. You can find out what your credit score is free; you are entitled to a free credit report once a year.

The following factors contribute to your credit score:

* payment history
* how much you owe
* how long you’ve had a credit history
* whether you’ve applied for new credit recently
* types of credit used

Why would you want a good credit score?

Companies use your credit score to see if you would make a good customer. Credit reports are used:

* for determining if you are a good credit card customer
* for determining how good a car insurance customer one might be
* for determining how good a mortgage customer one might be

Besides determining whether one qualifies for credit or not, the credit score also groups people into how desirable they are as a customer. Companies are willing to offer lower interest rates to people with higher credit scores because they are more desirable as customers. Conversely, the worst you credit score is, the less attractive the offers look like to you.

Besides situations dealing with credit, credit scores are also often used

* as part of a hiring decision
* as part of an apartment rental application

This may seem like an invasion of privacy but many companies are doing it.

What lowers a credit score?

* The biggest thing affecting your credit score is probably going to be missed or late payments. A lender hates seeing this on a credit report. Who wants to lend money to somebody who has shown themselves to be a bad borrower?
* Having balances too close to the maximum amount allowed on credit cards also lower a credit score.
* Applying for too many credit cards in a short amount of time lowers a credit score.