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Protect Against Home Foreclosures by Protecting Your Credit

By Sheryl Landrum
Mortgage Credit Problems Columnist


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With the upswing in home foreclosures, the mortgage industry is seeing a tightening of guidelines for homeowners to qualify for new mortgage loans -- this can hurt borrowers trying to avoid foreclosure by refinancing out of risky mortgages. Borrowers' income now requires more documentation as do assets claimed on their mortgage loan applications. W-2 employees are in general not allowed to state their income and must provide full-income documentation. With the squeeze on lending guidelines, now is an even more important time to understand your credit and protect your credit scores. See how credit preparedness can help you avoid a home foreclosure.

Lenders put an emphasis on credit scores when underwriting home loan applications and borrowers with good credit have much less risk of high-rate mortgages that can put them at risk of a mortgage foreclosure. To avoid risky loans that lead to home foreclosures, remember these credit basics:
  • High outstanding debt: Keep balances low on credit cards and other revolving debt; if at all possible, keep debt under 25 percent of your available credit.
  • Delinquent payments: Paying your mortgage on time is the first step to avoid foreclosure prone loans. Lenders do not want to see late payments -- especially mortgages!
  • New accounts: Don't open up new credit lines too quickly, but do not close accounts either. A good history with a creditor can also help avoid foreclosure prone mortgages as length and breath counts.
While this may seem simplistic, it works. Following these guidelines can help you get a good home loan and not one that is foreclosure prone. Talk to a trusted lender or loan officer today and find out more about improving your credit and improving your next home loan.

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