Is the mystery of your credit stopping you from shopping for mortgage rates? No? Maybe it should be!

credit-score-meter

It’s absolutely something that every prospective home buyer should think about.  “What’s my credit score?”  And, more importantly, how’s is it going to affect your credit score?  What’s in your credit report?  Is that Old Navy card you signed up for in college still in there?  Knowing these things makes up some of what you should know before you sit down to check your mortgage rates.

First off, I’m not saying you shouldn’t sit down with a licensed mortgage lender.  They are good at what they do.  What I am saying is that you should know what they’re going to find in your credit report before they do.  By this I mean that you should have already checked your credit reports and scores from all three major credit reporting agencies (TransUnion, Equifax, and Experian).

Every time a lender checks your credit report they do what’s called a “hard inquiry.”  The record of that inquiry goes into your credit report.  It’s unavoidable and too many hard inquiries can have a negative effect on your credit.  (What the!?)  And to top it off, your credit report, once pulled, will only be usable by a lender for a short period of time (usually 90 days).  It can potentially take longer than this to fix any errors that may be found.

So, here are some suggestions for what you should do BEFORE you sit down with a lender:

  1. Get a copy of your 3-bureau report and scores.   You can do this for free (really, free, no sign-ups or cancellations) at Credit Karma.  They will provide you with your 3-bureau report and scores.  The numerical scores provided will be your “Trans Union” and “Vantagescore” credit scores.  This is important to know because most lenders use FICO (Fair Isaacs Company) scores, which will most likely be different.  It’s nothing to worry about, bit it is something to keep in mind.  Click here if you really want to know the differences in the scoring types.  The main point is to get your credit report and review it for errors and accuracy.
  2. Dispute and correct  errors, incorrect information, or accounts that aren’t yours.  You must do this with your reports from all three credit reporting bureaus.  Remember, under the Fair Credit Reporting Act (FCRA), you have rights as a consumer about what’s in your credit report.  This includes having incorrect or false information fixed or removed.
  3. If your have negative, but accurate, information (like missed payments, collections or charged off credit cards) then talk to the company reporting the information to the credit bureau and ask them about removing it.  Many are willing to negotiate with you.  Please remember; if you elect to pay off a collection, get it in writing first that they will remove it from your credit file.
  4. Dispute inaccuracies, remove negative accounts, and input notes about anything that may be negative like a collection or charge off.  You can have copies of disputes and explanatory notes about accounts added to your credit report.
  5. If you get some push back from companies about the information they are reporting, don’t give up.  Be persistent, be friendly, and remember that you have options.  Repairing your credit file is a process.  It can take time.

By no means is this list all comprehensive.  The basic point is that you don’t want to go into the lending office blind.  Know what lenders are going to see.  Print out and carry a copy of your report with you.  There’s a lot to credit and it can become complicated.  As a stroke of good measure, it’s always a good idea to check your credit report regularly.  You can also do this through Credit Karma.  It’s a good way to stay ahead of problems so that you don’t’ have to scramble last second when it comes time to buy your next (or first) home.

This credit stuff can get complicated.  Please post any questions you may have below or send me an email.  I’m happy to help.  Cheers.