Credit Challenges

Credit remediation is a subject consumers often face with fear and trepidation, and for good reason. With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. The good news is there are ways to improve less-than-perfect credit scores and obtain a loan for the home you really want.

It's important to start out knowing just what a good credit score is. Credit scores for securing loans with the best terms generally begin around 680, although this number may differ slightly among lenders. You shouldn’t despair if you come up shy as there is always room for improvement. Increasing the credit score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan’s interest rate.

While credit repair is necessary for some, it's not the only way to increase a credit score. Even if you have stellar credit, you can advise them of ways they can enhance their scores through these steps:

• Evenly distribute your credit card debt to change the ratio of debt to available credit. Let's say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

• Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don't close those old accounts!

• Ensure your credit report is accurate. Many times a score can be improved by simply having a misreported item corrected.

Alera Financial offers two credit counseling programs: Score Advantage to assist borrowers in raising existing credit scores, and Road to Home Ownership to counsel prospective borrowers on how to improve credit and qualify for home financing. Depending on the program, borrowers can see results in as little as 30 days.