Disadvantage of Bad Credit on a Home Equity Line of Credit

Homeowners that have a bad credit will definitely experience difficulties when they are going to apply for HELOC (Home Equity Line of Credit). This kind of status can result to a poor credit lines.

What do you know about credit score? It is differ from figures 300 to 850. It is said to be the formation of the Fair Isaac Corporation. That score were basically used by lenders who usually arrange the home equity line of credit to place an interest rate charge for the home owner.

When the home payer has low credit score, they will need to pay higher interest too. A credit line or scores higher than 700 will be a guarantee of a good interest rate. Other way of indicating whether or not a lender should approve a home owner’s application is by the its standing. It is always the homeowner’s credit score as the basis on what to select for the homeowner’s credit limit.

The credit level or score is the result of the past line of credit made by the homeowners. In the U.S.A, there were three agencies keeping of records for every customer’s line of credit. Those agencies were Experian, Equifax and TransUnion. Those three agencies will have to be reached by the homeowners who wanted to raise their credit scores.

To be able to skip and repair the bad credit and to raise the line of your credit, the homeowner must have to chase of an error claims that money is owed. If it is proven or if the homeowners have proved that those claims are false then it is a big chance for them to raise their credit scores. This process are available and should be taken by homeowners has a score less than 640 which is a bad credit, especially when the homeowner is planning to seek a home equity line.

The struggle of a credit score is not that worse. A credit report’s survey in the U.S.A reveals that 80% of such reports were known to have mistakes. Hence, homeowners could have reason to dispute the credit standing that is being used to figure out the rate of its interest on a home equity line of credit.

The couple’s line of credit, a pair that are join homeowners, is based on three credit scores from someone with the more extensive income. This kind of score is needs to be corrected by the homeowner. For this alteration, it may require a written statement to each of the said agencies. Those agencies will then reach the homeowner and announce if more details are needed. If the homeowners were given a chance, then the credit level will be increased therefore the interest rate for the selected home equity line of credit will be much more lowered.

If the homeowner happens to have a good credit score then he will want to avoid shifting to that state of bad credit. This means that the homeowners should keep away from unnecessary spending that could bring them out of the limitation for their credit limits.

The Four Horsemen of the Private Equity Apocalypse

Introduction

Over 10 years, across 24 private equity sponsors, for 100 portfolio companies, and past 300 deliverables, certain patterns emerge. Let’s call these an 80-20 observation. This article addresses one such observation. Deal teams should think critically about four behavioral enemies of value creation that challenge both the investment professionals and the C-level stewards of their portfolio companies. We call these The Four Horsemen of the Private Equity Apocalypse.

Procrastination

The human condition is punctuated with preferences and avoidances. Deal teams are no different. The sizzle is in the next transaction. Comparatively, the operational side of the investment is boring. However, execution vindicates the investment thesis. Moreover, small, unattended problems may metastasize into full-scale crises.

Assuming the dashboard metrics have a practical mix of leading and lagging metrics, i.e., input, process, and output metrics, questions should be asked routinely about underlying root causes for variation against expectations. No different from a medical diagnosis, early detection and treatment underwrites good fiscal health. The points are simple. First, measure and analyze the “right things.” Second, react quickly to variation to verify whether it is a hiccup or a developing trend.

Denial

Denial regards self-deception through cognitive dissonance, i.e., filtering out stimuli contrary to one’s existing paradigm of “reality.” What’s the difference between denial and procrastination? They are first cousins. Whereas procrastination regards delaying execution that one knows should happen, denial is the inability or refusal to see the obvious need for action. For example, one who delays writing their will is a procrastinator. One who eschews the wisdom of a will is in denial.

Denial adopts irrational conclusions about negative dashboard metric variance. To wit, “This cannot be right (because we just renegotiated bank covenants)! Root cause(s)? Perhaps the forecast assumptions were flawed, the tracking metrics are unaligned, or both. The most common area of denial I witness in my private equity consulting practice regards portfolio company leadership teams. In Jim Collins vernacular, this regards the right people, with the right skills, in the right positions, at the right time.

Private equity transactions often place new responsibilities on portfolio company C-levels. Absent the aptitude and attitude to learn, the correct decision is a fait accompli because these C-level professionals are not sufficiently equipped to execute the responsibilities of their roles relative to the investment thesis. Great leaders chronically struggle with tough personnel decisions. Upon making the decision, most lament their denial that resulted in value-destructive procrastination.

Alpha-Dog Behavior

“Alpha-dog behavior” is another way of saying “control.” For openers, “control” is illusionary. Leaders only accomplish great performance through proselytized followers. Followers do not commit until they internalize the WIIFM-”What’s in it for me?” In deference to this new reality, leadership styles have changed dramatically over time. This entails abandoning command and control dicta in favor of more inclusive and collaborative styles.

Leadership style evolution is somewhat a generational phenomenon. Millennials have a different “flight-or-fight” DNA from baby-boomers. Millennials’ version of Maslow’s hierarchical aspirations of fulfillment and self-actualization has different definitions. A recent client experience encapsulates the point. The managing director fumed, “Doesn’t the (portfolio company) leadership team understand that they should be grateful to have a job in this economy?” Since the U.S. has enjoyed a basically robust economy from 1983 until 2008 (notwithstanding the mild recessions following Desert Storm and the dot-com bubble), millions of employees have a skewed perspective for “tough times.”

The picture is complicated. Sandwiched between employees and deal teams are C-levels. These C-levels may struggle with deal team directives. Why? Some deal team members lack managerial experience that translates into credibility chits with the C-levels. Recessionary dynamics exacerbate the phenomenon.

Hoarding

Hoarding is the antithesis of delegation. What’s the difference between hoarding and control? Actually, they, too, are first cousins. However, whereas control is a power manifestation of centralized decision-making, hoarding is related to execution. A prime symptom of hoarding is “around-to-it.” Translation: I’ll get around to it (eventually). Two counterpoints are offered. First, even Superman is vulnerable to kryptonite. Second, there are only 24 hours in a day; consequently, bandwidth is a finite commodity.

The solution is to prioritize and delegate to the lowest level of functional competency. This may be within the firm, within the portfolio company, or to an outsourced vendor. Hoarding is not a sign of strength. Hoarding may be viewed as a sign of insecurity. Moreover, hoarding may limit upward career mobility. A sage mentor once quipped, “If you cannot be replaced, you cannot be promoted.”

Effective leaders delegate. They also respect followers who push back for clarification on priorities and the corresponding execution implications. Successful leaders engineer efficiently executed deliverables. Superior leaders do not burn out their subordinates.

Summary

Many seasoned veterans opine that the more they learn, the more they realize how little they actually know. The “I don’t know” epiphany may be a healthy step toward value creation. The litmus test for leadership is what such professionals choose to do when confronted with the unknown. Electing to master new skills is laudable but time-consuming. Sometimes the skill entails knowing when to defer to a colleague or when to outsource to subject matter vendors. The decision-drivers are speed, costs, and benefits, i.e., IRR on the value-add. Indeed, relationship-minded vendors might address the issue as well as mentor both investment professionals and portfolio company C-levels toward knowledge transfer. Value creation hangs in the balance of the decision.