Homeowners and renters feel differently about managing their credit, with more renters than homeowners saying they believe they have more debt than they should, according to an industry survey released today.

More than 81 percent of homeowners and 65 percent of renters believe that they manage their credit extremely well, according to a survey of more than 1,200 people conducted by the Mortgage Bankers Association, an industry trade group. The survey on consumer credit habits also revealed that 54 percent of renters feel that they have more debt than they should, compared to 39 percent of homeowners. 

While renters report that they are generally familiar with important mortgage terminology, homeowners are significantly more knowledgeable about these mortgage terms. Of the renters surveyed, 45 percent say that they are considering buying a home in the next year or two. 

“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,” said Doug Duncan, senior vice president and chief economist at MBA. “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 home-ownership.” 

“The majority of homeowners who refinanced used the money to improve their overall financial situation by paying off or consolidating debt, or using the funds for home improvements,” said Regina Lowrie, MBA’s chairman. “This research provides value to lenders and demonstrates that consumers are more sophisticated with their finances than we may have believed.”

Key findings of the survey include:

  • Eighty-one percent of homeowners and 79 percent of renters know someone who has been in serious trouble with their credit. When asked if they personally had been in serious trouble with their credit, 40 percent of homeowners and 54 percent of renters said yes.

  • Seventy-one percent of homeowners and 72 percent of renters believe that Americans don’t manage their credit responsibly. Seventy percent of homeowners and 74 percent of renters also feel that Americans don’t pay off their debt in a timely fashion. Additionally, 93 percent of homeowners and renters think that Americans have too much consumer debt. 

  • Seventy-six percent of homeowners and 54 percent of renters have no debt or pay off debts in full every month, while 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 a cash-out refinance, more than three-quarters used the funds to pay off or consolidate debt or make home improvements. Seventy-one percent believe that this action helped improve their overall financial situation. Fifty percent of respondents who have a HELOC feel the same way.

  • More than two-thirds of homeowners and renters believe that credit cards are the most difficult type of debt for consumers to pay off. 

  • Of the 50 percent of homeowners and 52 percent of renters who discovered errors in their credit report, 78 percent of homeowners and 73 percent of renters were able to correct those errors.

***

Send tips or a Letter to the Editor to jessica@inman.com or call (510) 658-9252, ext. 133.

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