Having Good Credit Doesn’t Mean You Aren’t Struggling
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credit: nalilo
There have been a few scary stories going round recently about borrowers with excellent credit ratings who have still ended up struggling to pay for their homes or even defaulting on the mortgages. It just goes to show that you have to make sure you’re incredibly well-informed, even if you think you’re financially under control.
There’s a good example of this at CNN Money, discussing a woman who had a FICO of 780 but still ended up struggling to make repayments. She was caught out by an ARM - an option adjusted rate mortgage, which meant she was able to make monthly payments that didn’t even cover the interest, and the difference was added on to how much she owed. Many high credit score borrowers were signed up to these loans in the last few years, often so they could buy property they couldn’t quite afford. Another case of if it’s too good to be true, there’s something up.
The main lesson is not to take out a home loan making assumptions about variables you can’t control: for example, assuming that the value of the property will rise, that you’ll get a pay increase, that your expenses will drop. You’re much safer to settle for a smaller house, a lower debt and a lot more financial security.
Tags: credit | FICO | Mortgages | personal finance
This entry was posted on Thursday, May 22nd, 2008 at 3:30 am and is filed under Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
