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Credit Reports

Many boat buyers are very worried about how their credit report will affect their ability to buy a boat. Most people will not need to worry about the effects of their credit history during the boat loan process.

However, you can be better prepared if you get a copy of your credit report to review before you apply for your boat loan. That way, if there are any errors you can take steps to correct them before you make your application.

If you have had credit problems, be prepared to discuss them honestly with a boat loan professional. Responsible boat loan professionals know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit may be considered satisfactory.


Credit Scores

The boat loan industry grades one's credit based on such things such as payment history, amount of debt payments, bankruptcies, equity position, credit scores, etc.

Here is a compiled a guide to help you estimate your credit grade. This is only a guide as many companies have exceptions that may result in more strict or more lenient guidelines.

A General Guide to Credit Grades

                           
	Credit	Debt	Max	                
        Score	Ratio	LTV	
                          
A+	740+	40	90	
A	700	40	90	
B	680     40      90      
C	660     40      90      


Bankruptcy/Foreclosure

A+   None Allowed Within 10 years
A   Minimum 3 Years, Re-Established Credit
B    Minimum 3 Years, Some Late
C    Minimum 3 Years
D    Discharged
E    Possible Current

The figures shown here are estimates. When trying to figure your credit grade, keep in mind the following principles:

Other Things Being Equal-When your have derogatory credit, all of the other aspects of the loan need to be in order. Equity, stability, income, documentation, assets, etc. play a larger role in the approval decision.

Worst Case Scenario-When determining your grade, various combinations are allowed, but the worst case will push your grade to a lower credit guide. Mortgage Late and Bankruptcies are the most important.

Going Once, Going Twice-Credit patterns are very important. A high number of recent inquiries and more than a few outstanding loans may signal a problem. A "willingness to pay" is important, thus late payments in the same time period is better than random late as they signal an effort to pay even after falling behind.


Credit Guide Scoring  

In a nutshell, credit scoring is a statistical method of assessing the credit risk of a loan applicant. The score is a number that rates the likelihood an individual will pay back a loan. The score looks at the following items: past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit, number of inquiries.

Credit scoring will place borrowers in one of three general categories:

First, a borrower with a score above 720 and above may be considered an A+ loan. The loan will involve basic underwriting, probably through an "computerized automated underwriting" system and be completed within minutes. Borrowers falling in this category may have a good chance to obtain a lower rate of interest and close their loan within a couple of days.

Second, a score below 720 but above 680 may indicate underwriters will take a closer look at the file in determining potential risks. Borrowers falling in this category may find the process and underwriting time no different than the past. Supplemental credit documentation and letters of explanation may be required before an underwriting decision is made. Loans within this FICO scoring range may allow borrowers to obtain "A" pricing, but loan closing may still take several days or weeks as it does now.

Third, borrowers with a score below 680 may find themselves locked out of the best loan rates and terms offered. Boat loan professionals may divert these borrowers to alternate funding sources. Borrowers may find the loan terms and conditions less attractive than the "A" loans, and it may take some time before a suitable funding source is located.

As more companies utilize credit scoring, the loan approval and closing will be compressed for most consumers. In the future, a high FICO score may be your ticket to a speedy and competitively priced boat loan.


Credit Reporting Agencies  

Equifax 
PO Box 105873 
Atlanta, GA 30348 
(800) 685-1111

Experian 
PO Box 8030
Layton, UT 84041-8030 
(800) 520-1221

Trans-Union 
PO Box 390 
Springfield, PA 19064 
(800) 916-8800


Correcting Your Credit Report  

You have the right, under the Fair Credit Reporting Act, to dispute the completeness and accuracy of information in your credit file. When a credit reporting agency receives a dispute, it must reinvestigate and record the current status of the disputed items within a "reasonable period of time," unless it believes the dispute is "frivolous or irrelevant." If the credit reporting agency cannot verify a disputed item, it must delete it. If your report contains erroneous information, the credit reporting agency must correct it.

If an item is incomplete, the credit reporting agency must complete it. For example, if your file showed that you were late in making payments on accounts, but failed to show that you were no longer delinquent, the credit reporting agency must show that your payments are now current. Or if your file showed an account that belongs only to another person, the credit reporting agency would have to delete it. Also, at your request, the credit reporting agency must send a notice of correction to any report recipient who has checked your file in the past six months.

For those items in your credit profile which you feel deserve further explanation (such as an account that was paid late due to the loss of job, military call-up, or unexpected medical bills), you may send a brief statement to the appropriate credit reporting agency. The information will be placed on your credit profile and will be disclosed each time your credit profile is accessed.


Credit Profile  

A Credit Profile refers to a consumer credit file, which is made up of various consumer credit reporting agencies. It is a picture of how you (as an individual) paid back the companies you have borrowed money from, or how you have met other financial obligations.

There are usually five categories of information on a credit profile:

  • Identifying Information 

  • Employment Information 

  • Credit Information 

  • Public Record Information 

  • Inquiries

What is "NOT" included on your on a credit profile:

  • Your income 

  • Your race 

  • Your religion 

  • Your health 

  • Your driving record 

  • Your criminal record 

  • Your political preference 


Credit Report Access  

The Fair Credit Reporting Act (FCRA) outlines specifically who can see your credit profile. Businesses must have a "legitimate business need," and a "permissible purpose," as stated in the federal law to obtain your credit file.

Otherwise, only you, and only those who you give written permission, can access your credit files. Your neighbors, friends, co-workers, and even your family members cannot have access to your credit profile unless you authorize it. Some examples of those who can access your credit files are:

  • Credit grantors 

  • Collection agencies 

  • Insurance companies 

  • Employers

Any company that receives a copy of your credit profile will be listed under the "Inquiry" section of your report. The Fair Credit Reporting Act (FCRA) is the federal law regulating credit reporting companies like Equifax, Esperian, and Trans Union. It has been in effect since 1971. A revised FCRA became effective October 1, 1997. This law protects consumers' rights, such as the right to review and contest information in their credit profiles it also specifically defines who can access the information in a credit profile, and how you are notified of this activity.


Credit Questions & Answers  

Why do we need credit reporting?

Credit reporting is needed because it provides the information that helps consumers make purchases, secure loans, pay for college educations, and manage their personal finances. Credit reporting makes it possible for stores to accept your checks, banks to offer credit and debit cards, businesses to market products, and corporations to better manage their operations to benefit the world's economy.

What is a credit inquiry?

An "inquiry" is a listing of the name of a credit grantor, or authorized user who has accessed your credit file. Each inquiry is posted to the credit file so you know who has obtained a copy of it. Credit grantors post an inquiry before offering you a pre-approval credit card application. These are listed as "promotional" inquiries on your credit file because only your name and address were accessed, not your credit history information. They are NOT sent to credit grantors or businesses for reasons of credit reporting. They are listed for your informational purposes only.

How does divorce affect consumer credit?

A divorce decree does not supersede the original contract with the creditor, and does not release you from legal responsibility on any accounts. You must contact each creditor individually and seek their legal binding release of your obligation. Only after that release can your credit history be updated accordingly.

Should I use one of those companies that promise to help correct my credit?

It's your choice. However, beware of companies that promise to remove accurate information from your credit file. Accurate information cannot be removed from a credit file. There is nothing they can do for you that you cannot do for yourself by contacting the credit reporting agencies directly. Only time will heal a delinquent credit history.






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