As an active REALTOR® in the Hemet San Jacinto, Ca real estate marketplace, I am repeatedly asked specific questions about today's real estate market - especially in today's economy. In an effort to provide more information to my community, I am publishing this Top 5 in Real Estate Social Networking Systemsm "e-Article," in which I provide useful real estate information to my real estate networks. If you find the enclosed information beneficial to your family and friends, I encourage you to forward it to your "social network" as well.
A 680 Credit Score Just Isn't What It Used to Be
Do you remember when a 680 credit score provided the best interest rates? Today, according to Bankrate.com, the best rates and mortgage programs go to consumers with 700+ credit scores. Consumers with less than a 700 credit score may see additional fees of 1% or more and increased interest rates as high as 1% over the base rates. The increased fees and interest expense represents about $3,500 in extra fees and as much as $134 a month in additional monthly mortgage payments for a new home buyer purchasing a $350,000 home.
Making this problem worse is the ever-changing landscape of the economy and credit markets. Take one example: A consumer who had a credit score of 732 last year is now at 648, yet they have continued to pay all of their bills on time. So what were the primary causes of this dramatic decrease in their credit score?
First, the consumer had their oldest and most established credit card closed by a creditor due to non-usage. Second, two other creditors dropped the consumer's available credit limits, which negatively impacted their credit utilization ratios (i.e., amount spent each month compared to the credit limit). In each case, these changes occurred for no other reason than the creditors' overall concern for risk in the marketplace. This is happening unknowingly to millions of consumers across the country who have good to excellent credit.
So what should you do? From consumer credit coaches Jeff Mandel and Marlin Brandt of ApprovalGUARD (www.approvalguard.com), here are three suggestions to keep in mind:
1. Understand how credit works. Although you may think you understand how credit works (i.e., "As long as I pay all of my bills on time, I will have good credit"), there are many misunderstandings. Understanding how credit reports and scores work to create an excellent credit profile is important and becomes the foundation to strong financial self-management.
2. Credit and debt optimization. Take a snapshot of your current debt profile compared to your current income and liquid assets, then look for ways to optimize your debt. Examples could include strategies to reduce credit card balances owed to lower limits that will help you strengthen your credit scores, reduce interest rates and/or create opportunities to move balances to lower interest rate debt alternatives.
3. Know what's going on. It's important to review your credit at least three or four times per year. By doing so, you can monitor it for changes that may have occurred without your knowledge. It's also a great opportunity to self-monitor your profile for errors or suspect activity such as identity theft. The Fair Credit Reporting Act guarantees you access to a free credit report every 12 months. For more information visit the Federal Trade Commission website at http://www.ftc.gov/. Once on this page, click, "Free Credit Reports" for information on how to obtain your annual credit report from each of the three major credit reporting agencies free of charge.
Understanding, building and self-managing your credit is like changing the oil in your car. If you do it regularly, then the car runs better. If you do it only when the engine has problems, you often find yourself in a challenging situation. Please feel free to forward this email to relatives, friends and colleagues who may also find it helpful. For more information, email me!
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