With the subprime mortgage crisis that’s going on right now, people of ALL economic levels are feeling the crunch. Housing values are at an all-time low, which is good news for potential first-time home-buyers.
The Federal Reserve Bank is lowering key interest rates in order to stimulate the market. Which means that not only are housing prices low, but mortgage rates are low.
But there’s a problem! Banks do NOT want to lend money right now. They are scared spitless that people are going to “charge-off”…in other words not pay back their debt.
So what are they doing about it? They are tightening their credit policies. In other words, they are RAISING THE BAR to make it more difficult to obtain a loan. They can’t afford the risk of offering credit to someone who might charge-off, so they are pulling back on their offers.
A key indicator of this is that they are requiring higher FICO scores (credit report scores) to be approved for loans, credit cards, etc. (By the way…they will not disclose the cut-off number to you…only whether or not you made the cut.)
If you are looking to refinance, get a mortgage, or even a credit card right now, your credit score will need to be as high as possible. Details about how to improve your score can be found in this document, and it’s easier than you might think.
There are little things that can lower your score, and equally there are little things that can raise it significantly. For example, did you know that EACH TIME you apply for credit (ie: give someone permission to pull your credit), that gets counted and it lowers your score? (People with ‘good credit’ aren’t usually looking for more credit…people that are looking for every bit of credit they can get are usually in a riskier situation.)
Please…before you apply for your next credit card, refinance, or apply for any loan or mortgage, make sure your credit score is in top shape. (Find out how!)