Real Estate

Credit Scores Matter In A Tough Housing Market

Posted: 5/23/2012

More than half the country doesn’t know about the lending programs announced by President Obama after a $25 billion settlement with the banks.

(NAPSI)—There’s encouraging news for homeowners who face a tough housing market. New government mortgage settlement programs may help homeowners avoid foreclosure.

That’s good news, because the tough housing market is expected to be worse or much the same for at least the next year. In a recent survey conducted by FreeScore.com, nearly six in 10 respondents expect tight housing credit to continue.

A good credit score is important when it comes to qualifying for a home loan, yet many prospective homeowners do not understand how their credit score works. Forty-seven percent of the survey’s respondents mistakenly believe lenders control a person’s credit score, when in fact lenders have nothing to do with it. Individuals control their own scores through their financial habits, such as the amount of credit outstanding, repayment history, length of credit history and new credit accounts opened.

Mortgage rates have dropped, but millions of borrowers have been unable to take advantage of the lower rates because they have “negative equity”—their mortgages are worth more than the value of the underlying property. Analytics firm CoreLogic reported that 22.1 percent of homeowners are in this situation. A large percentage of those borrowers fell behind on their payments, leading to foreclosures.

Even though most economists expect mortgage rates to remain near their record lows, mortgages may be more difficult to obtain, as banks are more cautious about extending credit.

Consumers with better credit and higher credit scores can generally secure home loans more easily and take advantage of low refinancing. Here are some ways to better manage your credit:

• First, track, monitor and understand your credit scores from each of the national credit bureaus—TransUnion, Experian and Equifax—in order to secure the best interest rates possible. Read your reports carefully to be sure there are no mistakes, and if you find any, contact the credit bureau.

• Pay bills on time. See if you can set up payment reminders so that your payments are not late.

• Reduce the amount you owe. Stop using credit cards and come up with a payment plan.

To aid borrowers, the government designed two mortgage settlement programs—the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP)--yet 72.76 percent of the survey respondents said they were unaware of the programs.

A list of questions and answers has been designed to help the public understand the new programs and learn if they qualify. The list can be found on FreeScore.com’s “Common Credit Questions” section.

FreeScore.com provides affordable, unlimited access to credit scores and information from the national credit bureaus. For more information, visit www.FreeScore.com.

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