Check Your Credit Before You Look For a Home

Before starting the home buying process you should always check your credit report for erroneous information. Why? Two reasons – first at any time more than half of the nation’s population has incorrect information on their credit report. Second, if there is not valid information on your credit report you will have time to correct it BEFORE you apply for a mortgage. It takes time to correct incorrect information on a credit report sometimes as long as a month, and that may be a month you don’t have if you have a home under contract with a thirty day closing.

That’s why we advise checking your credit report for both erroneous information and to see what are your actual credit scores. That’s because the higher the scores the better interest rate you will get for your home mortgage. By checking early you can make sure you are maximizing your best possible credit scores.

Here are some ideas for maximizing your credit score before you apply for a mortgage on a new home:

1. Do not take out any new credit ninety days prior to apply for a mortgage.

2. Other than your mortgage or car payments try to have all of your open credit accounts below fifty-percent of credit used and the closer to zero percent credit used the better.

3. Have a good mix of different types of credit – mortgage, car payment, and three to five revolving/credit card accounts.

These are the items that can you can control that have an immediate impact on your credit score in addition to making on-time payments for all of your accounts.

There are three different credit bureaus that report a credit score on you. They are Experian, Equifax, and Transunion. The mortgage lender will use all three in determining whether you qualify or not for a mortgage. Your mid-score is determined by eliminating the high-score & the low score leaving the middle one as the number the lender will use for your credit score.

Here is an easy way to contact all three credit-reporting agencies.

The three nationwide credit reporting agencies — Experian, Equifax, and TransUnion — process consumer requests for free annual credit reports. Under the Fair Credit Reporting Act, each credit bureau is required to provide a consumer, upon request, with a free copy of his or her credit report, once every 12 months. 

You can order a report from one agency or from all three by going to this central Web Site: www.annualcreditreport.com. You can also call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta GA 30348-5281. 
 
The Federal Trade Commission notes: “Because nationwide consumer reporting companies get their information from different sources, the information in your report from one company may not reflect all, or the same, information in your reports from the other two companies.”

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