Not only do you have to have a higher score to get lower rates, people that traditionally have those higher scores are finding that smaller things, like purchases made with retail credit cards and revolving lines of credit, are having a greater negative impact on their credit score even if payments are made on time.  The obvious question resulting from these changes is: WHY???

While there are several factors to consider, the simplest answer is to blame it on today’s villain; Big Banks.  In 2008 the nation’s two largest mortgage lenders, Fannie Mae and Freddie Mac, posted enormous losses.  Even massive TARP loans were not enough to stem losses so to recoup losses and mitigate risk they decided to take the TARP funds AND lend less.  In early 2008 they announced they would revise the number for a “good” credit score raising their requirements to 720; they increased it again in 2009 to a 740.  Other banks and lending institutions followed suit and soon so few people qualified for competitive rates, or even any loan, that consumer mortgage lending was nearly at a standstill.

While much of the blame lies with the banks, consumers are not completely powerless.  The most important thing is to be aware of not only your credit score, but what is contained in your credit report.  Consumers have the right to contest inaccuracies and each credit reporting agency provides an address where consumers can report discrepancies and send proof.  Consumers can also reduce their debt-to-income ratio; while not using available credit helps, closing lines of credit that are not used helps even more.  When applying for a mortgage a good mortgage broker can help you improve your credit by 10, 20, or even 30 or more points in a short period of time.