If you pay your bills on time you have good credit. Good credit is maintaining a credit history that lenders view as worthy of extending you a mortgage. Good credit also means that you are not borrowing more than you can afford to repay and putting your self at financial risk. Good credit affords you the ability of getting a loan when you need it. You will also tend to receive a lower interest rate with good credit versus bad credit.

Good credit makes it easier to get loans, credit cards, and better interest rates when you borrow. Credit problems make it difficult, if not impossible, for you to get the aforementioned benefits. Credit problems do not correct themselves or go away quickly. Late payments a year or more ago can affect your credit history today. Major problems, like bankruptcy or a loan default, appear on your credit record for years. Lenders evaluate credit risk, the likelihood that a borrower will make payments on time and pay off the loan. Some lenders have very strict guidelines and evaluate borrowers "by the book." Prospect Financial Services is dedicated to getting the whole story so we can work with you to find a loan solution that's right for you. To judge credit risk, lenders typically look at:

Income: Regular and documentable income from earnings, commissions, investments, rental payments and other sources. Lenders look for a steady income from month to month and a stable work history.

Assets: Savings, investments, retirement funds, cars and other valuables that are "liquid" or easily converted into cash.

Liabilities: Debts such as mortgage loans, home equity loans, credit card balances, car loans, student loans and other consumer debt.

Other Financial Information: Situations that could affect payments, such as lawsuits, collection activity, recent bankruptcy or property foreclosure, obligation to pay alimony or child support, or being a co-signer on another loan.

Payment History: Making timely mortgage or rent payments is very important. Paying late just once by 30 days or more can affect both the loan and the interest rate offered you. Late payments on credit cards, car payments and other bills are also factors.

Credit Reports: National credit bureaus collect information and provide reports to home lenders and other creditors. Credit reports include details on credit accounts and information on your payment history.

Debt-to-Income: Monthly debt expenses and income get converted to a debt-to-income ratio. While there isn't a standard, lenders often have a maximum number that they will allow a borrower to have.