Bad Credit Loans: How are Borrowers Categorized by Lenders?
You may be suffering from the effects of a bad credit report right now, and this is common for many American citizens nowadays – you’re far from alone. But hey, you’re not out of options at all – you still have the option of applying for a bad credit loan. Recently, a large number of people with a bad credit history (for example foreclosure and bankruptcy on their records) have turned to bad credit loans as a means of financing their homes. If you haven’t tried that option yet, you really have no excuse for delaying it any further – it can be the answer to all your problems!
A bad credit loan is usually available from various banks, credit unions and other financial institutions that deal with lending. They’re also offered on the Internet, and that sector of the business is booming quite fast according to some recent reports. You no longer need to wait in long lines and drive your car from lender to lender as you collect data to make your comparisons – you just need to sit down in front of your computer, connect to the Internet and start clicking around to find out the best deals for you!
Before you start calling lenders though, ensure that your credit report is in a good condition. If you’ve got a good credit report – i.e. your credit score is high – you can usually apply for a bad credit loan from pretty much any financial institution. There’s a number of lending agencies which would want a good credit rating from their customers before they allow them access to loan deals. But this is not valid for every lending agency – if you take your time and shop around a bit, you’ll eventually find literally hundreds of different agencies on the market, willing to work with you.
When you take your business to a bad credit loan lender to get your loan, you’ll be given a grade as they go through your credit report. The state of your report would typically place you into one of five categories, graded similarly to the system used in schools:
A: If you’re an “A” customer, all the lenders would give you their best rates and conditions. The conditions for being considered an “A” borrower are having a good and stable income, as well as a flawless credit history and being able to put down a specified amount of down payment. An “A” borrower has access to all the best deals and if you fall into that category, you really shouldn’t have any problems finding any loan you’re after.
A-: More of a sub-category than a whole one, this is basically an “A” borrower who has had charge-offs or collections in the last two years Most bad credit loan lenders would not regard your medical bills – and this includes any cases of hospitalization or visits to a clinic. If you’re in this category, you’ll still have access to good deals but you may have to pay slightly more on the interest rate.
B: Consumers with some small sports on their credit report for the last 18 months are considered as “B” borrowers. However, if the incident has only been one and it’s an isolated one, usual conditions state that if it’s a 90-date late payment (or less) it can be disregarded and you’d be considered an “A” borrower instead. Things that can drive you into the B category include charge-offs, collection accounts which are over $1,000 and have been happening more than once.
C: Now we’re getting quite low. A “C” borrower would have some acceptable blemishes on their report for the last 12 months and less than 6 30-day late payments or 3 60-day late payments. Borrowers in this category are given access to some deals with typically high interest rates and other conditions which may make the category a highly unattractive one – so do your best to stay out of it.
D: If you’re truly disregarding towards your credit and keep missing nearly every payment, this will put you in the D category sooner or later. You’ll get access to very few good deals from here, and you’ll have to cope with high interest rates all the time – good luck finding a deal with some more acceptable ones.
E: “E” borrowers are very few, and if you’ve managed to get here this means you’ve been completely neglectful towards your payments and have absolutely no chance of getting a good deal from any lender on the market.
