Quick Credit Report Repair Before Home Equity Debt Consolidation

A home equity debt consolidation loan involves putting up a home as collateral in order to borrow Cobra payday loans. Home equity is defined as the difference between the value of a property and any mortgage loans that are secured on it. Whilst there was a time when secured home loans were relatively easy to obtain, falling property prices and more stringent lending criteria now represent a considerable obstacle. Some credit report repair is likely to be necessary to get approval for a low cost homeowner loan.

How Does Home Equity Debt Consolidation Help?

A loan for debt consolidation is a way of putting multiple debts under one roof. This not only improves affordability, it also simplifies personal finances and offers a defined repayment term. Most consumers choose to consolidate small unsecured loans, credit card debt, unpaid medical bills, payday loans and miscellaneous household bills. The consolidation of debt also provides an opportunity to raise finance for a foreign holiday, home improvements or a new car.

Quick Credit Report Repair Methods Before Consolidating Debt

  • Credit report errors. Request a copy of a credit report from Experian, Equifax and TransUnion. The Fair Credit Reporting Act gives each consumer or a credit repair attorney the right to correct any erroneous data. This could lead to a higher credit rating.
  • Pay on-time. Failing to pay within the normal repayment cycle will lead to a score plummeting by 80 points. Paying on-time will result in a small credit improvement each month.
  • Never max-out a card. Even if the balance is cleared at month end, a score will still fall by about 30 points. The most effective way to get a better credit score is by using less than 10% of a credit limit each month.
  • Use old cards. Don’t leave old store and credit cards to gather dust. Making a few purchases and paying-off the balance will lead to an improved credit score before applying for a home equity debt consolidation loan.
  • Don’t close down old accounts. Shutting down obsolete forms of credit may seem like a smart move but it increases the likelihood of rejection for a loan for debt consolidation. This is because a higher percentage of any available credit is used.
  • Reduce debt. Lenders will examine income-to-debt ratios closely as the higher they are the more likely the customer is to default.
  • Avoid making too many applications. Each application for a loan for debt consolidation requires a credit search and this shows for 12 months. Lenders expect to see a reasonable number of searches, but too many will lead to rejection.

Dangers of Home Equity Debt Consolidation Loans

Whilst consolidating debt has a number of potential benefits, turning unsecured into secured debt can prove to be a risky business. It gives creditors greater powers of recovery in the event of default. There are other ways to eliminate debt, such as debt settlement programs and debt management plans. Whilst there are negative implications for credit scores, a debt-free solution could provide a more viable alternative when a bad credit history results in a higher cost of borrowing. Credit report repair following more serious transgressions can take several years.