#3 Poor Credit & or Bankruptcy

Number three on our list the borrower has poor credit

There is an immediate reason why a deal will fail, BAD CREDIT. Bad credit will kill a deal faster than anything else, so what exactly is bad credit. Bad credit is different for each type of deal, but let’s starts off with a discussion of credit first

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they’re named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk). Credit scores only consider the information contained in the credit profile. They do not consider income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status.

Credit scoring was developed as a way to consider only what was relevant to somebody’s willingness to repay the loan.

Different portions of the credit history are given different weights. Thirty-five percent of FICO score is based on specific payment history. Thirty percent is current level of indebtedness. Fifteen percent each is the time open credit has been in use (ten years old accounts are good, six month old ones aren’t as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit — credit scores requested.

Now that we have given you a brief analysis of credit score where should your score be if you are trying to get a loan? For an SBA Loan most lenders will not even entertain your loan application if you have less than a 650 FICO score. Some are now requiring a 700 FICO score. Another question we are asked a lot about is Bankruptcy.

Can I get a loan if I declared bankruptcy? Generally no, if the bankruptcy is less than ten years old it will stay on your credit record under the section known as public filings. The only bankruptcy that we may be able to get around, and I say maybe is one that was caused by medical reasons. Other than that a bankruptcy will also kill the deal.

For a much more in-depth study of credit and its relationship to getting your next loan approved, read our book GET Your Loan Closed. For a limited time only buy the book and get FREE weekly Commercial Loan Training. Download yours today for $37.00.