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Credit Reports Many homebuyers today are aware of the information in the credit report and how easy it is to access their report because of the prevalence of credit and credit card purchases. Some people are surprised, however, to find errors in their reports, so it is a good idea to plan ahead and find out what is on your credit report before you start the home search. This can be done in tandem with seeking a mortgage pre-approval or by requesting a report for free or at a nominal cost. Credit reports today are even available through the Internet. You can visit the American Homeowners Association website (www.ahahome.com) to get an instant report though iCreditReport (www.iCreditReport.com). Learn more about debt management and home buying counseling through the National Foundation of Consumer Credit (1-800-338-2227, www.nfcc.org), or visit the credit bureau web sites listed below. In the case of being denied credit, you can obtain a credit report free of charge within 60 days. Slow payments or collections, referred to as "derogatories" should be explained or corrected when you apply for a mortgage. Consumer Credit Counseling Services (1-800-388-2227) is a nationwide non-profit service that provides assistance at a low cost or no cost for consumers who need help managing finances. Experian will also provide one free report annually whether or not you have been denied credit.
The Big Three The big three credit reporting companies, Experian (formerly known as TRW), Equifax, and Trans Union, maintain profiles on consumers with details about car loans, credit card companies, gasoline and department store cards. If you own a home or previously owned a home, that information may be included in your report although in some states real estate loans are not reported. Mortgage lenders will be looking for a credit background that indicates the ability to manage your finances and a willingness to pay your debts.The company names and contact information are: Experian
(Formerly TRW)
P.O. Box 949 1-888-397-3742
Allen, TX 75103 www.experian.com Trans Union Corporation
Consumer Disclosure Center
P.O. Box 390 1-800-888-4213
Springfield, PA 19064-0390 www.transunion.com Equifax
Office of Consumer Affairs
P.O. Box 105873 1-800-997-2493
Atlanta, GA 30348 www.equifax.com Here's what to include in a request for a copy of a credit report:
- Full name including Jr., Sr., II, III, etc.
- Present address including zip code
- Previous address for past five years
- Social Security number (spouse's number, if applicable)
- Date of Birth
- Telephone number where you can be reached during business hours
- Your signature (and spouse's signature, if applicable)
- Spouse's first name, if married
- Check for fee for report/copy of denial letter, if applicable
If you have been through a foreclosure within the last seven years or a bankruptcy within the last ten years, it will be revealed in your credit report but the Fair Credit Reporting Act (FCRA) prohibits the credit bureaus from keeping information on your file for longer than these limits. It will be important to re-establish credit and have proofed that you can manage your financial affairs before seeking a mortgage loan. If you in the market to buy a home, you should postpone making any large credit purchases, such as cars, boats, and recreational vehicles until after you have purchased the home. The new loan may hurt your chances at getting approval for a mortgage. Don't skip any payments and stay on top of your credit balances. Credit Scoring The Fair Isaac Credit scoring (www.FairIsaac.com), also known as risk scores, result from a mathematical analysis of the information in the credit report at the time the report is generated. A score developed by Fair, Isaac & Co. (also known as FICO) predicts how likely a home buyer is to repay a new mortgage loan. The scores are included in reports delivered to mortgage lenders.Because the models have been validated and endorsed by Fannie Mae and Freddie Mac, use of risk scores often speeds the mortgage approval process. If a score falls within an acceptable score range, approval is immediate. If the score falls outside specified ranges, the mortgage lender usually will review other factors before approving a loan. The lender also may request the consumer to take additional action -- such as paying off credit card debt -- to improve his or her credit position and, therefore, the risk score. Factors that impact your credit scores include:
- How long you have lived at your address,
- Your job or profession,
- Your financial obligations,
- Any late payments made,
- The amount of credit you have outstanding,
- The amount of credit you are using, and
- The amount of time you have had credit established
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