The mortgage crisis left many people unsure what they need to do to secure a home mortgage loan in today’s economy. From credit score concerns to down payment questions to picking the right type of loan, there are many variables in play as you think about home ownership in 2012. Recent data tells us that mortgage lending standards are still tight so planning the best way to present your situation to home mortgage lenders is more important than ever.
How To Repair a Credit Score
Many people don’t know the appropriate credit score for mortgage approval. Many people don’t know if their credit score is good or bad (or somewhere in between) due to shifting industry standards since the sub-prime lending crisis in late 2008. The truth is, there is no magic credit score needed for mortgage approval. What was good credit just a few years ago is now concerning as banks have less money to lend and are more restrictive with whom they lend funds. If you don’t know how to repair your credit score to take advantage of the low interest rates right now, these tips are a useful guide to elevating your credit score for mortgage approval:
- Show you’re responsible with both major kinds of credit – Installment loans (auto loans, student loans) and revolving credit (credit cards) are the most important credit to your credit score. If you don’t have a credit card, get one. If you don’t qualify for a credit card, consider getting a secured card, just make sure the card agency reports to all three credit bureaus. If you don’t have any installment loans currently, consider taking out a small personal loan – and again, one that reports to all three credit agencies.
- Pay down your credit card balances. Lenders look for a gap between the amount of credit you’re using and the limits you have. Below 30% indebtedness is a good level – below 10% indebtedness is even better.
- Pay all your bills on time. Paying your bills by their due date is one of the most important things you can do to help improve your credit score. Set up automatic payments if you need them to ensure you don’t miss a due date.
- Use your credit lightly. If you are trying to repair your credit, don’t expand the debt you’ve already accrued.
- Know your rights as a borrower. Review the Federal Trade Commission’s Facts for Consumers. Fight incorrect data or anything you think is inaccurate from your credit scoring reports. Credit companies have to investigate and review relevant information which means you shouldn’t be carrying data that’s penalizing you if it’s not legitimate.
- Avoid scams or debt consolidation services. While these might seem like your only hope, following the above list is a much more productive way to help repair your credit report without falling for scams and other pitfalls that prey on people with poor credit ratings.
When deciding to repair your credit history, it’s important to see the long term advantages that lead to a solid credit rating in the future. There are no quick fixes to poor credit reports other than realizing starting the above steps today is better than putting things off until tomorrow or later.
For more help about what’s needed to secure a home loan or to get set on a plan toward home ownership, trust the mortgage loan experts at Sammamish Mortgage where people realize their dreams of home ownership every day.