Have you ever thought of taking out a home equity loan or line of credit? If you are facing a big expense - like college tuition or home repairs -and you own your home, a home equity loan might make sense lotronotes.com But you may also be worried about your credit score luxuryhomesofdoorcounty.com You suspect that you have some history of bad credit—perhaps some late credit card payments or an unpaid student loan lynncolephotography.com You think that if you have bad credit, you can't get a home equity loan.

Home Equity Loans
What is a home equity loan? You own your own home and for ten years you’ve been paying your mortgage on time lyonprideproductions.com During this period you have built up equity in your home, which means that you are a part owner together with your lender maryellenhowey.com If you bought your house ten years ago for $300,000 and your down payment was $45,000, the amount of equity you have in your house is the down payment ($45,000) plus the principle you have paid (say, $15,000); this equals $50,000 mikedzurenda.com But there is one more factor: the current appraised value of your home newtonslawnservice.com For simplicity sake, let's assume that even in this recession your home has held its value and is worth $300,000.

In theory, you could access a portion of your $50,000 equity for a second mortgage, a home equity loan, or line of credit northparklife.com But what if you have bad credit?

When you apply for a home equity loan, the lender will take many factors into consideration when determining how much to lend you and at what price pharaohsoulsmc.com With bad credit, it may not be a question of whether or not you can get a home equity loan (if you own your home chances are good that you can) but how much it will cost you.

A major factor in the lender's decision is your credit history picodelpetroleo.com Today there are three major credit reporting agencies princess-tenko.com These are Equifax, Experian, and Trans Union treasurecoastopera.com Under the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions (FACT) Act you are entitled to view your credit reports at no charge once a year waddellhensley.com Do not contact the agencies directly; to learn about how to access your credit reports go to the website of the Federal Trade Commission at http://www.ftc.gov and click on "Consumer Protection."

The three credit bureaus most often use the FICO score system, which assigns each consumer a number rank between 300 and 850 webimagineeringgroup.com Higher scores (above 700) are good ashavenueneighbors.com Lower scores (below 600) are bad ayurnega.com The lower your score, the less money you can borrow and the higher interest rate you will pay.

What Can Affect Your Credit Score?
Many factors that seem obvious will affect your credit score, including missed or late credit card payments canatrans.com But there are other things that can bring down your score, too.

• How often your credit history is accessed csande.com That’s right: every time a potential lender checks your credit history, this fact becomes part of your record designsbyfemme.com If your credit records are being checked too often, lenders see this as a red flag jlautosalesllc.com Why? Because it may mean that you are “shopping around” for credit and are being turned down. A lender may think that you are a high risk.

• A short credit file makes you less desirable. Some consumers (wisely, they think) refrain from using very much credit. They may have only one credit card, which they don’t use very often. This is fine until they try to access a bigger loan, such as a home equity loan. A lender may see this customer’s lack of credit history as a higher risk and charge more for the loan.

If you want to get a home equity loan or line of credit, be aware that because of the current recession many lenders are tightening their requirements. Your bad credit may be a factor if you are denied. But you have rights; under federal law, if a lender takes adverse action against you (such as denying your application for credit or charging you a high interest rate), you are entitled to a free explanatory report. You must request your report within sixty days of the decision.

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