Believe it or not, the mortgage business is showing signs of life again.
Wells Fargo earnings show mortgage originations increased by 20%, compared to negative growth the quarter prior, and they expect that to grow.
So signs point to a gradual loosening of credit standards for potential mortgage borrowers, but most people still think they won’t qualify, which is a large part of the reason people aren't trying to get a mortgage in the first place.
But will you want to try to get a mortgage next month? Next year?
If so, mortgage securitizer Freddie Mac recently posted a blog on three ways to improve your credit score, starting today.
As the blog states: “If you're thinking about buying a home, you need to be aware of your credit because it can affect your ability to qualify for a mortgage.”
I take that one step further.
While you may or may not be interested in refinancing or even entering home ownership, tips to improve one’s credit score are helpful across the board.
An improved credit score does offer more leverage when engaging the debt markets, in terms of choosing better deals from multiple lenders — that is true.
More importantly, a higher FICO [credit] score indicates better financial acumen in individuals and shows a greater prowess when managing money. In short, the better the credit score, the greater the financial freedom.
“Don't despair if your credit is low, there are ways to repair your credit and improve your score,” the Freddie Mac blog states. “As Fair Isaac [the company that provides the FICO] points out, the best advice for rebuilding credit is to manage it responsibly over time.”
So here is Freddie Mac’s way to start today, taken from the more comprehensive advice on the Fair Isaac website:
1. Check Your Credit Report Annually
"Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct," FICO advises. If there are errors, you can dispute them with the credit bureau.
2. Set up Payment Reminders
"Making your credit payments on time is one of the biggest contributing factors to your credit score. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due," FICO states. Automatic payments are also a great option for those on a salary. The down side in this case is that auto payments are not actively made by you, so may not instill a greater satisfaction of money management.
3. Reduce the Amount of Debt You Owe
"This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards," FICO reports. OK, wait — so stop using my credit cards so that I can get more credit? That may not make sense, on the surface, but you can't put the cart before the horse when building your credit. And you'll never qualify for a mortgage (secured debt) if you can't manage short term credit cards (unsecured debt).
So what's a good attack plan if you owe big time on multiple cards? "Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts."
Want more tips on how to fix your credit score and maintain good credit? Hit up the Fair Isaac site for 5 more FICO tips.
