Is it true? Could this housing crisis be coming to an end? Recently reports are indicating the banks are finally loosening up on credit criteria. Although the report notes the average credit score required to attain a mortgage loan is 700, other factors that play into getting approved are “loosening up”. While this credit score of 700 is higher than scores required prior to the crisis, it is hasn’t changed from a year ago. The survey also showed the credit score requirement was consistent over all four quarters last year.
However, there are other market indicators pointing toward the loosening of credit availability. Banks are now lending amounts up to 3.5 times borrower earnings. This is up from 3.2, which is what it was at its lowest during the crisis. Banks are also loosening their loan to value ratios(LTV). This is said to be the clearest indicator of a sign of improvement in the mortgage credit conditions. While banks were lending at low of 74%, banks are now lending at 82% LTV.
While credit conditions may have loosened slightly, potential home buyers are still struggling with credit requirements. With the influx of bankruptcies, short sales, and foreclosures, maintaining good credit seems to be much more difficult these days. In fact, economists point out that in November alone, 8% of contracts that “fell-out” were a result of a potential buyer not qualifying for a loan.
Additionally, economists say “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
Make sure you are in the know when it comes to your credit rating. Stay educated. Your credit report reveals many aspects of your borrowing activities and abilities.
Here are some tips for fine tuning your credit score:
– maintain consistency in identifying yourself on credit applications
– contact your creditors directly with any disputes
– avoid opening new accounts if you’ve applied for a mortgage
– pay down revolving balances to 50% of credit limit
-Remember authorized user accounts are always treated as joint accounts by the scoring system even if they technically are not
-Avoid the use of credit-repair companies
-Banking experts recommend you pull your credit report once a year to make sure all information is accurate and current