Looking to make home improvements but don’t have enough cash in your bank account? There are many ways to get a home improvement loan but for some people their credit score is too low. This can cause a high interest rate on the loan or having the loan application declined. There are many factors in getting home improvement loans and getting loans that will be the best fit for you.
TGUC Financial can help you obtain a home improvement loan.
Home improvement loan companies are looking at your income and expenses, down payment, assets, employment history, and most importantly credit score to make a decision if they will provide you a loan.
Determining Credit Scores
Credit scores are determined by the number of accounts you have, the types of accounts, your used credit vs. your available credit, the length of your credit history, and your payment history. There are three credit bureaus that determine your credit scores: Equifax, Experian, and TransUnion.
Payment history is when a lender or creditor looks at your credit report and determines the likelihood that you will pay back the loan on time. This also includes details on bankruptcies, foreclosures, wage attachments, and any accounts that have been reported to collection agencies.
Additionally, length of your credit history shows how responsible you have been with paying off your credit accounts. This includes paying all of the types of credit off that you have. For example, the different types of credit accounts that you have, resolving debt, and paying installment loans. They also look at this to see how well you are able to manage multiple accounts and different types of credit.
Credit Score Ranges
800-850: Excellent
740-799: Very good
670-739: Good
580-669: Fair
300-579: Poor
The greater the credit score, the better it is. The highest score is 850. You want to have a higher credit score because it will provide better opportunities for future loans and buying options. Higher credit scores also improve your loan interest rates. The better your credit score, the lower your interest rates will be.
Credit scores that are lower than 600, are considered a poor credit score. This will negatively impact your chances of getting a home improvement loan, more credit, or any general loans. Home improvement loans can have a range of 4% to 36% interest rate. This large difference is based on the risk of that loan which is defined by your credit score. With a poor credit score your interest rates could be as high as 36%, compared to having an excellent credit score that could get you interest rates as low as 4%.
Maintaining Good Credit Scores
Maintaining a good credit score is important to keep purchasing opportunities open. In order to do this, making payments on time consistently will keep your credit score high. Another thing to look out for when maintaining your credit score is keeping an eye on how much you are spending on your credit cards. Using your credit cards to their limit can impact your credit scores negatively.
Fix Your Credit Scores
Missed and unpaid payments from years ago can still largely impact your credit score negatively. This negatively affects your credit scores because missing or having unpaid dues will make you a more risky candidate to give more money to. Thus, your credit score will decrease when this happens. So how do you fix your credit score?
- Request and Review a copy of your credit report.
- Dispute credit errors with the credit bureaus.
- Pay the closest to the date fees.
- Pay the largest fees.
- Maintain low balances.
- Pay your bills on time from here on out.
- Catch up on past due payments.
- Keep older credit cards instead of newer ones.
There are many ways to fix your credit score little by little. To start, you need a copy of your credit report. With your report, you can find where it needs to be fixed. From there, you can see how to fix it. Credit blunders, like failing to make a mortgage payment, maxing out a credit card, medical bill issues, or co-signing on a loan, can not be easily fixed, but errors and incorrect information are easier.
Errors, like being a victim of identity theft, incorrectly reported accounts, or information being incorrectly merged with someone else’s credit score, can be fixed by having a dispute with the credit bureau or hiring a credit repair company.
You should pay off the payments due soon first to avoid having added late fees and increased interest rates. Out of those payments first fix the larger payments. Paying your mortgage, car, and other large loans like this are going to improve your credit more than paying back something smaller like a cell phone bill.
Another way to fix your credit score so you can qualify for home improvement loans, is to maintain low balances and pay your bills on time here on out. Rebuilding a good track record can help improve your credit score. Along with paying the bills, paying them on time is an important factor that determines your credit score. In order to not miss a payment, setting up an automatic payment option can help you stay diligent.
Furthermore, you can catch up on past-due payments. It is beneficial so that the debt does not continue to grow, minimizing additional late fees. Although the late payment will not be removed from your credit history, it will show that it has been paid which is better than not at all. In addition to paying off past payments, decreasing the amount that you spend on credit cards and lines of credit by maintaining a low balance on them relative to their credit limits can help you improve your scores.
Moreover, keep your older credit cards instead of your newer ones. This affects your credit history because over a longer period of time your credit will spread out and may be better than it is over a short period of time. If you are planning on canceling a card, then cancel the newest ones.
Why Get Home Improvement Loans
Home improvement loans are used to help invest in your home by improving the value of the home. The loan allows you to make improvements all at once and pay for those improvements over time. Home improvements such as repairs and renovations often increase the value of your property so you will make your money from the loan back by the time you are selling your property.
Making improvements can add value to your house, but what should the loan go towards that will offer the most return? Remodeling and renovating the kitchen and bathroom will result in the largest return. Modernizing kitchens are the most recognized real estate feature that adds value. Closely followed by bathroom renovations and then adding an extension to the house.
A home improvement loan is often a shorter term loan so interest rates may be higher than a mortgage. This also depends on your credit as mentioned above. Improving the value of your property is not only for improvements when you are selling, but also to live in the home that you make your own.
TGUC Financial Offers Home Improvement Loans
TGUC Financial can help you finance your home improvements. Contact us today.
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