President Obama and his staff were pushing for one free credit report each year in the new financial regulatory bill. This is yet to pass so nothing is set in stone but at the present time there is a free annual credit report available. Unfortunately, this credit report does not include a credit score.

Over the last several years many Americans have seen their FICO credit score drop which in turn has made it difficult to get out of debt with higher interest rates. By doing your research on a FICO credit score calculator and estimator you build to better understand what you need to do to improve your financial life.

Author: Alan Lake

Subprime is considered to be an individual or entity that is below the requirements to meet prime borrowing guidelines.  Those who are subprime have a heightened risk of default due to previous loan default or delinquency.  They may also have filed for bankruptcy of have limited debt experience.  There is no true definition, but those with a FICO credit score below 650 are considered on the border for a subprime loan.

In 2006, prior to the financial crisis, the Wall Street Journal reported that 61% of all borrowers receiving subprime loans had credit scores high enough to qualify for conventional, prime loans.  This is quite disturbing to think about when we look at our current financial situation.  If those borrowers had done their research and signed conventional, lower rate loans, it is likely that many of the problems we are currently having would not exist.  There is no way to determine what would happen, but if 61% of borrowers saved at least one percentage point on their mortgages, BILLIONS of dollars would have been saved over the last two years.

Subprime started in 1993 when lenders realized the high demand for loans to high-risk borrowers.  Statistically, one fourth of Americans have impaired credit or have limited debt experience.  The market for subprime loans is quite large and many lenders felt the need to jump on this opportunity.  The lenders knew that they were giving risky borrowers with little debt responsibilty large sums of money.  They also knew that these borrowers had a good chance to default.  This is why we should have no sympathy towards the lenders.  They knew what they were getting into and they should go bankrupt!

Subprime Column

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Subprime mortgage – what are my options explained that the first step in getting a subprime mortgage is to get a credit score.  After you have gotten a reputable credit score you need to decide what your options are. Individual credit scores are analyzed as follows:

lower than 539 – very poor credit
between 540 and 589 – poor credit
between 590 and 669 – fair credit
between 670 and 729 – good credit
above the 730 – very good credit

A credit score of 650 is currently considered being on the border for a subprime loan.  If your rating is below 650 you need to decide if you can increase that score in the near future.  If you have the financial means to pay off debt before getting a subprime mortgage, that would probably be the best idea.  In the long run, you will save more by increasing your credit score before getting a mortgage.  It would be wise to see down and see where your financial status will be in the next six to twelve months.  If you cannot lower your overall debt and increase your credit score, you should go forth with contacting a lender to get a subprime mortgage.  If you can lower your debt and increase your score, create a spreadsheet to get this done and do it!

Tomorrow we will show you some numbers on how you can increase your credit score and lower your overall mortgage payment.

Subprime Mortgage Series

Subprime Mortgage – What are My Options