Homeowners and Renters Manage Credit Differently

Mortgage Banking, August 2006 | Go to article overview

Homeowners and Renters Manage Credit Differently


A plurality of both homeowners and renters said they believed they manage their credit extremely well, although homeowners made up a much higher percentage of credit-confident homeowners than renters, according to a survey conducted by the Mortgage Bankers Association.

MBA's survey on consumer credit habits revealed that more than 81 percent of homeowners and 65 percent of renters believe they manage their credit extremely well. According to the survey, however, 54 percent of renters feel they have more debt than they should, compared with 39 percent of homeowners.

While renters reported they are generally familiar with important mortgage terminology, homeowners were significantly more knowledgeable about these mortgage terms. Of the renters surveyed, 45 percent said they are considering buying a home in the next year or two, according to Doug Duncan, MBA's chief economist and senior vice president of research and business development.

"Renters reported being less confident about managing their credit extremely well, but 75 percent of them have recently requested a copy of their credit report," explained Duncan. "Both renters and homeowners are checking their credit reports, and for those 45 percent of renters hoping to become homeowners in the next few years, this is a key first step toward homeownership."

The survey noted that 81 percent of homeowners and 79 percent of renters know someone who has been in serious trouble with his or her credit. When asked if they personally had been in serious trouble with their credit, 40 percent of homeowners and 54 percent of renters said they had.

Some 76 percent of homeowners and 54 percent of renters reported they have no debt or pay off debts in full each month. On the other hand, 12 percent of homeowners and 31 percent of renters find it very difficult to pay the minimum monthly payments and make ends meet.

Of the homeowners who had done a cash-out refinance, the survey noted that more than three-quarters used the funds to pay off or consolidate debt or make home improvements, and 71 percent believe this action helped improve their overall financial situation. …

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