In addition to the terms and interest rates, your credit score may determine whether or not you can even get a loan. Even more recently, landlords, insurance agencies, utility companies, and others have started using your credit score to make decisions that affect your financial life. And even if you are trying to get a better job to increase your income and improve your credit score, your credit score meaning becomes even more important. Many employers now check your credit history before they will hire you.

What kinds of things determine your credit score? How you have managed your credit in the past is the most important factor. If you have had late payments reported to the credit bureaus, that will negatively impact your score. Of course, a bankruptcy will practically destroy your credit rating for quite some time. Being late with a mortgage payment is especially egregious.

How much debt you already have is right up there in importance as well. Even children know that you can’t pay back a loan if you don’t have enough money to go around. It is a rare person who will go without food in order to pay for shopping sprees, so having a lot of debt will also lower your score.

How long you have been in the credit world. If you have had a decent credit history for a lot of years, you are less of a risk than a recent graduate who has never bought anything on credit. Of course, if you have had credit for a long time but have run into some situation that has made you miss payments or have had to file a bankruptcy, being old won’t help you.

Most economists predict, and it would seem reasonable, that the average credit score is going to begin falling sometime soon. As unemployment rates increase and underemployment becomes more prevalent, and as the downward trend in investments continues, average credit scores are very likely to drop, simply because people who would otherwise be very focused on paying their bills in a timely fashion may simply be unable to do so.

If you can, though, you should work hard to protect your credit rating; banks and other lenders are becoming more and more picky about whom they will allow to borrow money, and the terms for less-than-perfect credit are getting more stringent. For example, six years ago, I got divorced and bought a house. My credit score was slightly below the average credit score at that time – about 685. I qualified, however, for great terms, because at that time, low interest rates were awarded to people with a rating of 680 or better.

Six years later, with all personal circumstances being the same, I would not qualify for that 5% mortgage, as most lenders in my area are requiring a score of 750 or more to get the best rates. That is a jump of seventy points, so as you can see, it is even more important that you keep your credit history clean, make sure your report is accurate, and work to keep your score as high as you can.

So where do you stand? The average credit scores are highest in Vermont, Minnesota, Massachusetts, South Dakota, North Dakota, Iowa, New Hampshire, and Montana. The average credit scores in all of these states is 700 or higher.

The average credit scores are lowest in Texas, Louisiana, West Virginia, Michigan, Georgia, North Carolina, New Mexico, Nevada, Arizona, Alaska, and Alabama. All of these states have average credit scores in the 660’s and 670’s.

First of all, the highest credit score that exists is 850; conversely, the lowest is 300. Of course, the majority of people fall between those two extremes, and in fact, the average American credit score is now about 690, but with the downturn in the economy and unemployment on the rise, it is likely that individual credit scores will begin to fall, and that means the average credit score will begin to fall right along with them.

Even though the average American credit score seems pretty high, at 690, that is really not “good enough” to get the best credit terms from most lenders. Most banks and other lenders use the credit history and credit score to determine whether or not they will lend you money, whether or not they will require collateral from you, how much interest they will charge you, and how long they will give you to pay back your loan. Obviously, the better your rating, the better deal you will get at the bank.

Although there are no hard and fast rules that are uniform across the banking industry, most lenders reserve the best rates for people with a score of 720 or better. That means that if you are just average (690, remember?), you are not likely to qualify for the best interest rates and terms. Of course, the policies of the different institutions vary, and right now, a lot of bankers are turning down requests for loans for anyone who is well below the average American credit score, and traditionally, even in the best economy, a score less than about 620 would get you the absolute worst deal.

Some economists predict that in a few years, however, the lenders will be unable to be as particular about whom they offer loans to and will have to be a bit more flexible about terms; the notion revolves around the fact that banks make money by lending it out. That is a fact; that is why they do it; they don’t lend you money just to make you happy. That being the case, they must lend, and if the average American credit score drops significantly, banks will have fewer options. But that time will not come very soon or in the immediate future; right now, everyone expects banks to err on the side of caution, and that is just what they are doing.

When the economy is tough, the banking industry gets more conservative in its policies; if you are in the market for a big-ticket item such as a house or a car now (or will be soon), you should make every effort to keep your credit history on the up and up so you can stand out as better than average and can get yourself the best deal possible when you need to borrow money.

What does it mean to refinance your mortgage?

As the name implies, it means that you renegotiate your loan. Usually, refinance mortgage loans are taken out by people who wish to tap into the equity they have built up by paying down the principal on their mortgage. For this reason, refinance mortgage loans are also sometimes referred to as home equity loans.

What exactly does it mean to have equity in your home? That means that your home is worth more than you owe. If the market value of your house is, for example, one hundred thousand dollars, but you only owe eighty-five thousand, you have fifteen thousand dollars worth of equity in your home.

Many lenders are willing to offer a refinance mortgage loan if you have equity in your house, and you may choose to refinance to get cash for something you want or need such as a vacation, home improvements, or a college fund. You may also decide to refinance simply because it makes good financial sense. A lot of times, people have to take less-than-ideal mortgage terms when they are buying their house, either because they have bad credit or little credit when they first take out their home loan.

As time goes on, however, you may have a better credit history or the prime interest rate may be lower than it was when you first bought. If the prime rate is lower, you are likely to be able to refinance your mortgage loan at a lower interest rate and show a significant savings with reduced monthly payments or a lifetime interest savings of thousands of dollars.

Does it make good sense to refinance your mortgage loan? For some people it does; for others, there is no real advantage. If you are considering tapping into your home’s equity, be sure to discuss all your refinance options with a good financial planner and understand what exactly the pros and cons are for your particular situation.

Many people find a refinance a viable alternative to taking out other costly loans that may not have the same tax benefits as a home equity loan. Some refinance mortgage loans even have a lower interest rate than government-backed student loans, so it pays to take a look at all your options and make the best decision for you.

The first step in securing bad credit auto financing is to review your credit history. If you detect errors, get them corrected before you go for your car loan. You can order a credit report for free once a year. If there are inaccuracies, write a letter to the credit bureau explaining the discrepancies. They have 30 days to either confirm the fact or remove it from your credit report. You will be surprised at how much your credit score improves when you challenge inaccurate information.

The next step is to determine how much you want to pay for a car. This includes how much you can comfortably put down at the present and the amount your budget can handle in terms of monthly payments. You can use a car loan calculator to help you determine how much care you can afford.

The next step in securing bad credit auto financing is to prepare the documentation. This includes proof of employment and income. Remember that with a house, the value of the property doesn’t change when the new owner takes possession, but with a car, the value drops when you drive it off the lot. That is why the people giving car loans have to be so picky about who they finance.

Finally, keep a clean credit history. Once you have secured bad credit auto financing, make sure that you pay your loan on time every month. This will help you get loans in the future.

Bear in mind that as a person with less than stellar credit, you will be expected to make a larger down payment and will be faced with higher interest rates. This means your monthly payments will either be higher per month or stretched out over a longer period. You might be expected to put down up to 50 percent of the car’s price in order to secure the loan.

The interest rates can be up to 26 percent. At that rate, on a $15,000 loan over 4 years you will pay more than $9200 in interest.

You should watch out for dealers who “specialize” in bad credit car loans. These dealers often have inflated prices on the cars and higher interest rates than you would be able to secure elsewhere.

Often people faced with bad credit auto financing situations are better off purchasing an inexpensive new car than they would be going to a used car dealer as new car dealers can secure factory financing.

The good news about bad credit auto financing is that if you make all of your payments on time, you will be building good credit for yourself. That means the next time you go for a car loan, you can get it at a more attractive rate.

Do you know your credit score? Do you wonder how TransUnion, Experian, and Equifax calculate credit scores?

Credit scores are calculated by looking at your income, your expenses, the amount of credit you already have, and how well you have paid your bills in the past. By looking at all of these different items, the credit agencies apply a mathematical formula, calculate your credit score, and report their findings and determinations to those who inquire about your creditworthiness.

Information that may have a negative impact when your credit score is calculated incude:
• A large amount of outstanding debt.
• A low income-to-debt ratio.
• A bankruptcy.
• Late payments
• No credit history
• A limited credit history
• Unpaid utility bills
• A lot of open credit accounts, even if they have low or no balances
• A lot of accounts being opened at the same time.
• Closing accounts that still have a balance.
• Closing a lot of accounts at the same time.

If you are attempting to calculate your own credit score, you may find it difficult to do so, as there are quite a number of variables involved, but if you follow the simple strategies below, when your credit score is calculated, you are likely to have a pretty good score:
• Apply for only one type of credit at a time and wait for a few months before applying again.
• Pay your utility bills (electricity, cable, water, phone) on time each month.
• Live within your means.
• Make all credit card or other credit payments on time.
• Pay more than the minimum due on your credit cards.
• Use credit cards to buy necessities such as groceries, but only if you have the willpower to put the same amount of money away and pay for them in their entirety when the bill comes in.
• Maintain a savings account for emergencies.
• Save up for the purchase of expensive items rather than charging them all the time.
• Check your credit history periodically to make sure it is accurate.
• Correct errors on your report promptly.

When you start shopping for debt consolidation loans for bad credit situations, you’re likely to find dozens of potential resources who claim they’ll be able to help you get your finances back on track. No doubt there are many legitimate lenders out there who are willing to work with someone who has run into a bad patch and find their credit rating slipping, but you may also run into some unscrupulous types who may try to take advantage of what they believe is a desperate situation. Just because you may be shopping for debt consolidation loans for bad credit conditions doesn’t mean you deserve to be taken advantage of. Keep these two things in mind to protect yourself from becoming a victim:

Be Confident
Your credit score may have fallen recently, but so have the credit scores of many others due to tougher economic conditions. When shopping for debt consolidation loans for bad credit problems, don’t let a potential lender scare you into a bad loan because they want you to believe that you have no alternatives. There are still numerous lenders willing to work with people who have credit problems. If you’re patient, you’ll find that there are plenty of fish in the sea.

Check the Terms
Many lenders will want to talk to you only about your payment amount and not about the complete terms of the loan — until it comes time to sign the paperwork. In some cases, lenders who like to specialize in debt consolidation loans for bad credit will put you into a loan that may leave you worse off than before. They do this by charging you an outrageous interest rate, higher than you’re already paying, by stretching the payments out over a longer term and then selling you on the idea of the lower monthly payment. While this sounds good on the surface, run the numbers yourself and see exactly how much more you’re going to pay for the privilege of lowering your monthly payment a few dollars.

Remember, there are good lenders out there offering debt consolidation loans for bad credit, so shop around and find one that is interested in dealing with you fairly and has your long-term financial health in mind.