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Needing Loan Help Could Mean a Lower Credit Score
We all know that the housing market has been struggling with all the economy problems and many people are in need of help to help pay their bills, their mortgages, and to avoid foreclosure. Many homeowners though are getting a not so good surprise when they ask for another loan. Many are finding out that their credit ratings are going down.
The Obama administration’s loan modification program can help borrowers who have made their payments on time but are close to defaulting, but this can also lower their credit score by as much as one hundred points. A lower credit score can mean big problems when trying to get a new job or another loan in these hard economic times.
Many people are angry that a program specifically designed to help home owners also comes with this nasty surprise. Many home loan counselors and borrowers both see this surprise as being very unfair. Still, there are many people that see it better than facing a foreclosure which means that a credit score can be severely low for many years impacting a good portion of many advantages.
In order to enroll in Obama’s plan, “Making Home Affordable”, people have to enter a trial period in which they make at least three payments. After this trial people though many people are seeing their credit score go even lower than it was before they applied.
People really need the program though and can face even more serious financial problems if they have to face foreclosure instead. So even though this program has its surprising downside, it is still helping so many people that have no where else to turn. Before considering this program though, it is important to know that your credit scores will drop and it is important to ask questions and get all the information that you can. “Look before You Leap” takes on a whole new meaning for many home borrowers with this program.
Number of Views :121The Three Biggest Credit Crushers
If you plan on buying a home, you should know that an iffy credit score won’t cut it anymore. After the housing crisis, banks, and even the FHA, are demanding better credit histories from anyone wanting a mortgage.
If you want a mortgage, you need to be able to prove to lenders that you’re a good credit risk. To do that, you need to watch out for these three credit crushers.
1. Late Payments
If you miss a payment, your credit score might take a hit. Miss enough payments, and you’re looking at some serious damage. If your payment is more than three months late, or if you have a history of missed payments, it will be much harder for you to get a loan. Lenders want to be sure that they’ll get their money back.
2. Past Judgments
People make mistakes. If you have a foreclosure, bankruptcy or loan default in your recent past, you’re going to have a more difficult time getting a decent loan to buy a house. Unlike smaller nicks in your credit history, a judgment sticks around for seven years. Even if your credit habits are great five years down the road, you’re still going to be haunted by the one big financial flop in your history, and if you’ve messed up a significant financial commitment before, regardless of the reason, lenders are less likely to give you a second chance. And if you do get a loan? Expect a very high interest rate to come with it.
3. Significant Consumer Debt
You have three credit cards, with a combined limit of $25,000. Although you never miss a payment, your total debt on the cards is around $20,000. Your excellent payment history should make you a perfect candidate for a mortgage, right?
Probably not. You might be making your payments on time, but you have a lot of debt already on your plate. Lenders are going to look at your questionable credit habits, and you stand a good chance of being turned down. A good credit score is based, in part, by the amount of credit you have available. Even if you’ve been approved for a high credit limit, it looks bad if you’re actually using most of the limit. Lenders see the amount of consumer debt you have as a gauge of your spending habits. If you spend money that you don’t have without a second thought, it might come back to haunt you. Lenders don’t want their mortgage payments on the line when that happens.
If you want a loan, you need to be able to prove that you have a strong credit history. If you have a habit of missing payments, sign up for autopay through your bank account. The amount due comes out automatically every month. No more late payments, and you could save quite a bit on late payment fees as well.
Pay down your consumer debt. Paying the minimum amount every month won’t make any significant dents in your debt, especially if you owe a lot. Pay as much as you can every month, and set a goal to pay your consumer debt off entirely within a year or two.
If your credit history contains a foreclosure, bankruptcy or other judgment, you can’t erase it until the seven years are up. What you can do, however, is do everything in your ability to make sure the rest of your credit report is in great shape.
Number of Views :56Check Your Credit Score Before Asking for a Loan
Your credit score can have a drastic effect on your ability to get a good rate on a mortgage. Most people realize this.
What you might not know is how important it is to know your credit score before even approaching a bank for a loan. Knowing your credit score before you start trying to buy a home is essential. For one, it takes away the chance of a nasty surprise when you get to the bank and find out that your credit is not as good as you thought. On the other hand, if you have really great credit, it is good to know that going in, as well. It gives you an edge in the process if you know your credit score; you can request the best terms possible for your loan, and you will very likely get them.
Knowing your credit score also makes it easier for you to shop around for the best rates. This is especially true if you have poor credit. Many lenders have an online estimate service for mortgages and other loans. Use these tools and compare the results. Cross any lenders off your list of potentials if they only offer consistently high rates. By knowing your credit score, you can narrow down the number of banks you need to visit without having to leave your home or even pick up the phone.
How much of a difference does your credit score make? Well, your credit score determines the interest rate for your loan, amongst other things. A credit score of 650, which is about average in the US, and 720, which is considered to be great credit, can make as much of a 1.5% difference in the interest. For a home that sold for $200,000, that is worth a couple hundred dollars a month in payments, or two to three thousand dollars a year.
The best time to check your credit before buying a home is not right before you start applying for loans; you should check as far in advance as possible, especially if you know that your credit score is low. It can take several years to rebuild credit. Checking your credit earlier means that you have more time to pay off any old debts and work on improving your credit rating before you start shopping for a loan.
Checking your credit is easy, and you can get all three credit reports free once a year. Be sure to check the reports over for any inaccurate entries, as they may be a sign of identity theft, and then begin paying down debts. Getting your credit score in the best shape as is possible, before approaching a bank for a mortgage, can save you thousands of dollars; isn’t that worth the time to check it early?
Are you ready to take the first step towards getting a mortgage for a new home? These are the three credit bureaus that lenders check. Follow the links to check your scores:
Number of Views :163