On occasion, I am asked are things better or worse? When it comes to “credit things”  I think a higher percentage of people are trying to tackle their budgets by keeping their spending down to align more with their income realizing the tapping into their homes equity days are over, at least for the time being.  Many people are tackling any bad credit they may have incurred realizing that any costs of credit repair are a drop in the bucket compared to just letting any bad credit stay on their credit report for 7-10 years.

People are trying to be as responsible as possible to increase their credit scores because the reality is

Sometimes old debt that you thought was long ago dead and forgotten comes back to haunt you.

A scary practice performed by junk debt buyers and collection companies is the purchase of old and often outdated debts for pennies on the dollar and then come after you for payment.

These outdated debts are known as Zombie Debts which you may have to kill if they resurrect from the grave.

Really, the better question should be “How MUCH does bad credit cost you?  In a word…TONS!

Your FICO scores are determined by a number of things but most importantly how timely your credit is paid and the overall amount of credit used as compared to your credit lines available.  Of course other factors come into play but these two play the most significant in determining your credit score.

Your credit score for many lenders is the biggest factor if your loan will be approved at all and at what interest rate. To give you an example I was speaking to one of our members and he was telling me he had a credit score of 552 and over the last few months had increased his scores to 632.  At first you might say not to shabby, an 80 point increase.  I agree,  an 80 point credit score increase is nothing to sneeze at and certainly looks like some solid credit repair has been under way!

Today, I’d like to tell you what mortgage lenders look for in when deciding on granting your request for a new mortgage loan. Now this is not meant to be an underwriting class but a basic understanding of the process and what  you’ll want to consider as you begin thinking about buying a new home.

When you’re looking for a new mortgage many lenders evaluate your credit based on the “Three C’s.”

Credit
Is it likely that you will repay the loan? Are your payments on time and up-to-date? Are you financially stable and reliable?  What are your credit scores?  Today’s marketplace, most conventional lenders require your scores to be in the 700+ range and most FHA loans a 620 score or higher.

Capacity
Are you able to pay the loan? What kind of outstanding personal debt do you have? Do you have enough earning power and net worth to repay a mortgage or home equity line of credit?