It was reported in today's Advocate newspaper that there has been an update on credit reporting for mortgages for home loans. In the past, whether you paid the minimum monthy payment on your credit card or if you paid it off in full, it was all the same from the credit bureau and to the lender. In the past, I was told it was best to have a balance that you paid each month to show that you paid timely. That showed a lender you were able to manage your finances. Now two of the credit reporting agencies are sending 'trending' data to your loan officer. This shows if you pay the minimum amount, more than minimum, or pay off in full each month. Now, your credit score is still the biggest factor in securing a loan; however, if you are borderline on qualifying, and you pay more than the minimum or, even better, pay off your credit card loan in full each month, this may be just the thing for the lender to decide you are a good credit risk. This trending data line started in September so it's relatively new. If you are shopping for a home in the next few months, it would be a good idea to pay off as much credit card debt, as always, or increase your payment on every card to show you pay more than minimum.
Speaking of credit cards, in this economy, it would be wize to keep that credit card debt to zero and only use it for emergencies or large purchases - which means you don't use it again until you pay it off. Carrying a lot of credit card debt does not help you in the long run. I remember when we decided to go to a 'cash only' basis in order to pay off all the credit cards and not get any new ones that it took a lot of discipline and a lot of delaying purchases that we didn't really need. Once we got a handle on that (less than 2 years) it's amazing how fast your savings can grow!!! We pay off all our credit cards at the end of the month. And, we use credit cards instead of cash to get bonuses. You have to REALLY be disciplined if you go that direction but if you can, think of all the extras you can get from your credit card companies. We fly practically free on first class to Europe and fly free when traveling in country too. There are companies that give you cash back too - which you can use to save up for your new home!! Just another idea!
As always, if you have any questions, please call the Pat Wattam Team at any time for more advice. 225-298-6900