Review Credit History
Many homebuyers make the mistake of not reviewing their credit history! When do you think is the best time to review your credit history?
- After getting a property under contract as part of the mortgage application?
Hint: What if there are problems with your credit? You may end up losing the opportunity to purchase the home, you may end up spending money for inspections that would be lost and you could end up wasting your time, your agent’s time, the seller’s and listing agent’s time. - Just before getting a property under contract?
Hint: Many sellers and listing agents won’t consider accepting your offer unless they have some proof that your credit is good and that you can qualify for a mortgage. Why is that, do you think? - As early in the home buying process as possible?
Hint: Gives you the best chance to correct items on your credit report before actually stating to look for property.
Credit Repositories
The three credit repositories can be contacted directly to get your credit report either online or by phone:
- EQUIFAX - www.equifax.com 800-685-1111
- EXPERIAN (Formerly TRW) - www.experian.com 888-397-3742
- TRANSUNION - www.transunion.com 800-888-4213
You can also get a copy of your credit report from a mortgage broker or bank as part of a pre-approval or pre-qualification process. However:
- Information is merged. This can be very confusing if there are errors and you need to identify which credit repository you need to contact to correct the information.
- Only one or two credit repositories are typically used. The second or third one might have inaccurate information - Banks pull from all three - So Should You.
- Credit Score may be negatively affected. This is not true as long as “mortgage reports” are pulled.
What is a “Credit Score”?
An automated credit scoring system using computer modeling software, based on an analysis of your credit profile (report). They are also known as:
- “Fair Isaac or FICO Score” - Experian
- “Beacon Score” - Equifax
- “Empirica Score” - Trans Union
What is the range of scores?
Approximately 300 to 850 with the higher the score the better.
- 680+ is considered good enough typically for automatic underwriting
- <680 generally might need an underwriter’s review of other factors
- <600 may result in increased interest rate and/or down payment
- 750+ may result in reduced interest rate and/or relaxed qualifying
Why is it important?
Statistics show there is a 1 in 8 chance that a borrower with a credit score below 600 will be delinquent or in default. For credit scores above 800 the statistics show only a 1 in 1300 chance of delinquency or default.
How can I improve my score?
- Don’t pay your bills late.
- Don’t have a sudden surge of credit activity and credit inquiries.
- Don’t tap out your credit line. Using 70% or more of a credit line will probably lower your score.
- Don’t keep lots of credit cards even if unused. Having too much unused, unsecured credit cards will lower your score.
Where can I get more information about credit scoring?
The three credit repositories - Equifax, Trans Union or Experian and www.fairisaac.com.