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Credit Reports Explained
By Kaci Cooper, 23 Jan 19:03
Check your credit and FICO scores prior to finding a house and getting pre-approved for aloan because this information may be the most important factor in obtaining a mortgage with a low interest rate.
If you check these reports before you hunt for houses, you have time to make changes that will improve your credit rating. It usually takes about 90 days to fix problems with your credit, though some homeowners claim they have improved their credit in a shorter amount of time.
For example:
Mary, a divorced woman who wants to purchase a home, but her ex-husband’s credit cards (still listed on her statement) are bringing down her FICO score. So, she disputed the credit cards being a part of her statement and within 48 hours was able to bring up her credit rating.
Depending on the lender, in some instances it is possible to pursue a loan before negative items have been removed, however, in most cases you have to prove to the lender why the items are disputable.
The Difference between FICO and a Credit Report
Your FICO score and your credit report are not the same. You should obtain your credit rating from the three major reporting bureaus- EquiFax, TransUnion, and Experian. However, you should also obtain your FICO score from Fair Isaac & Co. The following are the scoring factors:
Credit Checklist
-Does your history show that you have made payments consistently on time?
-How much debt do you have?
-What is the length of your credit history, in other words, how long have you been borrowing money? It is best if you have a long history because it gives the lenders more to see when viewing your credit history.
-Do you have new credit?
-What types of credit have you used? (bank cards, student loans, car loans, etc.)
What merits an A score?
FICO scores range from 350 to 850, 850 being the best score. On average, in the U.S. credit score are 723. Thus, most people with scores 720 to 760 still obtain good mortgage interest rates. Seventy to eighty percent of lenders determine your borrowing power based on your FICO score.
If you receive many zero percent offers in the mail, you probably have good credit.
Free Reports
The Federal Regulation
The Fair Credit Reporting Act requires that consumer reporting companies allow you access, if you request it, to your credit report for free once every twelve months. The Federal Trade Commission, a consumer protection agency under the government, has developed a brochure detailed your rights to access your credit report.
Turning It Around
In order to turn around bad credit, try the following:
-Don’t open accounts frequently
-Pay your bills on time, at least the minimum balance and remember, it always looks good if you overpay
-Don’t run up your balances
Having good credit is an important part of buying a mortgage, so it is in your best interest to make payments on time and maintain a good FICO score.
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