Credit is Expected to Stay Tight for Another Year

Welcome back!

That’s right…you read the headline.  If you’re wanting to purchase a home within the next year you ought to be careful not to let your credit score go bad.

According to senior loan officers at large banks, lending standards will remain tight until the second half of 2010.  The Federal Reserve Board’s survey revealed that an uncertain economic outlook and reduced tolerance for risk were the main reasons cited for tightening credit standards.

Although mortgage rates remain extremely low, being able to get a home loan will remain difficult with poor credit.  To help you maintain a positive credit score we’ve put together the following:

Things that affect your credit score negatively:

• Late or missed payments
• Using more than 80 percent of your total amount of available credit
• Bankruptcy
• Liens or foreclosures
• Periods of unemployment
• Too many requests for new lines of credit

Main factors that affect your credit score:

• Your payment history. The most important factor to a potential lender is whether or not you will pay your bills in full and on time. The more recent your good (or bad) payment history, the more important it will be for your credit score.
• Your outstanding debt. The more credit cards you have that are maxed out, the lower your score will be. As mentioned above, try to keep your credit card balances at 25 percent or less of your limits.
• The length of time you’ve been building credit. The longer your credit history, the higher your credit rating.
• The number of inquiries on your credit report. The more times you’ve applied for credit cards or loans, the more credit report inquiries will show up on your credit report. A higher number of credit report inquiries may indicate that you’re struggling financially or may have a lot of debt (even if you never used the cards or gotten the loans).

If you are interested in purchasing a home within the next year, but uneasy about your credit, contact us and we can work with you to make the American Dream of home ownership achievable.