elle's dwellings

Mortgages are the biggest debt most consumers take on in their life but the recent trends reveal that many borrowers aren't as informed as they should be before signing on. I'm watching the mortgage-delinquency rate climb and it's painful because I know that it's not just high risk borrowers who are suffering, it's widespread.

Foreclosures are increasing, properties are sitting on the market, values are hovering and adjustable rates are, well, adjusting. It's not easy to sit back and watch so here at elle's dwellings we are going to get back to basics of credit, finance and mortgages. This is Mortgage 101: The Credit Factor, the first in a series aimed at getting borrowers back on track.

Ron Lieber at the Real Estate Journal summed up today's real estate climate in Bulletproofing Your Mortgage: How to Spot Risks in Your Loan when he said "the exotic loans and more liberal borrowing rules that led to the recent industry troubles aren't limited to people with poor credit or lower incomes." His article is worth a thorough read for homeowners and those in the process of buying or refinancing. It's time for solid, no nonsense advice about mortgages and that article is a very good place to start.

The number one priority for current and potential borrowers is to get on top of your credit history and score. If you are financially fireproof, checking your credit reports can help you stay that way. A friend of mine who has a near perfect credit score decided to check his credit reports and found one of his tenants had taken out a credit card in his name.

Another friend found that his medical school student loans showed up twice on all his credit reports. The loans were listed individually and then again in his consolidation loan. But the errors were only discovered when he applied for a mortgage. To the lender, it looked as though he had twice the monthly liability, pushing his debt-to-income ratio out of the lender's comfort zone. He can assure you that the time to start clearing up credit mistakes is not when you are sitting across from your lender, it should be done well in advance.

In the U.S., there are three big national credit bureaus: Equifax, Experian, and TransUnion. It's imperative to check all three reports as they can each have different errors. There are two easy ways to obtain all three reports. You can get all 3 Fico Scores/Reports at myFICO, where 90% of big banks look for your scores.

Another option allows you to get your scores, reports and some good guidance from one of the most trusted and listened to financial advisors in the world - the Suze Orman FICO Kit . This product allows you to get your FICO credit scores and credit reports and also has useful FICO score improvement tools for correcting credit errors and improving your credit including EZ error Correct, Suze's FICO School, a customizable FICO Score Improvement Plan and the FICO Score Simulator.

The Suze Orman FICO Kit might seem "gimicky" but it's not. It costs just a few dollars more per year than the Fico Scores/Reports and is a useful tool that shows you how to get out of debt, improve your credit score and save on interest. A clean credit report and a good credit score are keys to saving money. For instance, improving your credit score by as little as 40 points can decrease your mortgage interest rate by almost 1%. On a $300,000 mortgage that's a monthly savings of almost $200.

Another important step in ensuring your credit health is to protect yourself from identity theft. The FTC estimates that as many as 9 million Americans have their identities stolen each year. You can learn more about identity theft at the Federal Trade Commission Identity Theft Site (FTC).

Fico offers some excellent tips on how to protect yourself from identity theft. Fico also offers two ways to keep an eye on your credit. Monitor Your FICO Score & Equifax Credit Report with myFICO Score Watch or protect yourself with the myFICO Identity Theft Security, a credit tracking service with a monthly fee. The alarming rise of identity theft is creating a wide range of identity theft protection services. One of the more successful services is LifeLock .

LifeLock set alerts on all of your credit reports, helps you monitor your credit and helps you minimize your identity theft risk with services like stopping unsolicited pre-approved credit offers. You can do many of the things that LifeLock does but the fee is minimal ($10 per month) to have them do it for you. Plus, LifeLock Identity Theft Prevention backs their service with an impressive $1 million guarantee.

Unless you are buying a home with cash, you need to have the best credit score possible to get the best mortgage rates (and terms) available. Your credit score is the first thing a lender is going to check, it's unavoidable. Get on top of your credit. This is the first step towards making a smart real estate investment and getting the most out of your mortgage.