Your Past Credit

Your Past Credit
In today's day and age, lenders don't look at the past seven years of credit history as they did previously.
Now the last 18 to 24 months count the most.
In a scenario where someone had a good credit history for 5 years and messed up in the last 18 months is
considered a far greater risk to lenders, as apposed to someone who filed bankruptcy 3 years ago but had
been great with payments for the last 18 months. Lenders will likely approve the ladder and deny the first.

Although bankruptcy is always recommended as the last resort, lenders don't frown upon it as much these
days after a few years of a positive payment history. This is where common sense comes in.
An individual that filed bankruptcy does not have debt and cannot file again for 7 to 10 years. They have a
new start on life and will likely not default again. After about 2 years of no credit defaults, this person
becomes a good candidate for a secured loan such as a home or car. Lenders view these people as a
secured risk due to the collateral of the home or auto. In case of a default, the lender gets to keep all the
money paid and resells the collateral.

On the other hand, you may have a consumer with too much unsecured debt such as personal loans and
credit cards with high balances that are not secured by any collateral. Even if this person pays their bills
on time and seem like a good credit risk, their credit is actually over extended and they are not able to
obtain more credit. This may also bring down their credit score dramatically.

Also, if the credit card balances are continuously over 50% of the limit, it may bring your credit score
down by as much as 50 to 80 points. That could be the difference in having a 620 and a 700 score.
Think about it!

That is another reason that it's always recommended to lower or better yet eliminate your unsecured debt
to improve your creditworthiness. If this task is difficult due to your financial situation,
talk to a professional to possibly reduce your monthly payments and interest through a debt consolidation
program.