In a previous discussion I had talked about 7 tips to getting a commercial lawn care business loan approved. That discussion opened up to include a few more important issues I wanted to pass on to you. These may not be issues you find yourself dealing with day-in and day-out unless you are looking to get a loan for a lawn care equipment purchase upgrade.
A member of the Gopher Lawn Care Business Forum was kind enough to have his wife share with us some important insights she had acquired while working in the commercial loan division of a bank.
I had asked a follow up question on credit errors and how they can negatively effect your ability to borrow.
What kinds of things should we all be looking for when you say errors? What are some that are not so bad and what are some that we should be looking for that are bad?
“Bad errors are things like accounts showing open or a balance that are not actually open. Other things may be listed as unpaid when they are. When looking at a client for a loan, they look at your debt to income ratio. In other words, your monthly payments cannot exceed a certain percent of your monthly income (my wife’s bank uses 28%). So, for sake of simplicity, for every $1000/mo. you make, only $280 can go out for credit bills (also includes rent/mortgage but does not include every-day things you need to live like food, gas, utilities, and grass stain remover. They figure you need the rest to live on.
If you are right at the 28% you also are considered higher risk and may have problems. I said all of this to say, if you have a closed credit card account that is paid off, but on your report it still shows you owe $500 or looks like you have monthly payments to them, that will look like you are closer to the 28% than you actually are. By the way, most of the time, unless you ask, they will just tell you that you haven’t been approved. You may never be aware that it was because of bogus stuff on your credit report. Keep in mind, even bad things on your credit report can be made a little better. My wife had one lady that had an unpaid check to a pizza place for a measly $28 hurting her report. Once she was able to prove it was paid and the report was in error, all was well.
It is kind of expensive, ($7/mo. added to my credit card ea. mo.) but I get a quarterly credit report I can access online. It is a service my credit card offers. You know if changes have been made that way. It also has a “what if” calculator on the web site so you can enter in scenarios on your credit report so you can see how your credit score would change if, say, a bad item were not on there, if you took out a mortgage or paid off a loan or credit card.
By the way, the scores are rigged to encourage you to carry some debt. You will have a higher score if you carry at least one card with a balance (instead of paying it off). A person with debt is a higher risk, yet your score drops? Also, you may be paying rent of $500/mo. but if you go out and get a mortgage that will cost you $700/mo. your score goes up. These guys are crooks, but we have to pay (I mean play) their game. Negative information, like unpaid liens stay on your report for fifteen years, bankruptcies ten, but the good items, only seven. Why? Because the negative things may not speak about who you are today, just who you were ten years ago.
Although you may have been irresponsible when younger and paying your bills on time now, the bad items give the credit bureau information to lend you money at low risk (because they can see you haven’t missed a payment in the last several years, although fourteen years ago you had a $500 lien against you, therefore they give you the loan, but at a higher rate because you are a ‘risk.’
Essentially, in short, when I say be wary of ‘errors’ on your credit history report, I just mean I want my credit report to look like it should. If this information is going to affect my life, then I want to get it right!
I looked on their site to quote where they admitted seventy some percent of credit reports have errors. They have changed the wording. Now they just admit that billions of pieces of information comes to them, so there are bound to be errors, but an independent study found that very few people were negatively affected by it. Nonsense. Did I mention I don’t like these guys? They have been a headache in the past. Not a fan.”
Very interesting information! If you have had problems with credit reports and rating, tell us your story and how you got it resolved at the Gopher Lawn Care Business Forum.