Credit Report Alert: Check Yourself, Before You Wreck Yourself

Monday, June 11, 2012

Taking stock of your creditworthiness by checking your credit report gasses you up for a speedy road trip to home-ownership.

What’s on your credit report tells your lender you’ve filled up with premium unleaded or that you are rolling on fumes. Premium gets you the checkered flag; fumes can stall your mortgage application.

Your credit report is also the nitro that fires up or blows a hole in your credit score, a number that represents you to lenders as creditworthy, stuck in the mud or something in between.

“Mortgages can be denied over just 5 points on a credit report, so it’s important for potential homeowners to become curious about their credit report,” said Maryanne Moyers, a broker with The Moyers Team in Woodbridge, VA.

The higher your credit score – 350 to 800 on the FICO scale – the more likely you’ll cross the finish line and pay your mortgage. Lenders cheer high numbers. They boo low scores.

Also, the higher your credit score, the lower your interest rate, the better your loan terms and, if all your other financial documentation is as stellar as your credit report, you’ll likely face far fewer potholes during the mortgage application process than those with blemishes on their report.

But, again, you won’t know where you are or how far you can go if you don’t take a look at your credit report.

Credit report report

If you’ve already hired a real estate agent, and that should have been your first step on your home-buying journey, he or she should sit you down right away and have you call up your credit report to learn where you stand.

“An alarming number of mistakes and surprises greet buyers. If you find your dream home, you might still be able to get a loan with a minor blemish, but why pay more in your monthly loan payment because of a reporting error?” asked Deborah Madey, a broker with Peninsula Realty Group in Red Bank, NJ.

You want to know what’s on your credit report before your lender gets its hands on it because you want time to correct, update and verify information.

Only one source of free credit reports is the one-and-only, federally-sanctioned free service offering you your legally-mandated, no-strings-attached credit report.

Don’t be fooled by Imposters. Online websites with names that sound like your credit report is free will try to sell you something else, usually credit monitoring services you likely don’t need, before you get your “free” credit report.

At you get one free credit report each year from each of the major three credit bureaus – Equifax, Experian and Transunion. That means you actually get three free credit reports every year.

And you do want to get all three, once a year, because what’s on each report can vary.

“Once you have decided that you’re in a position to buy a house, don’t purchase any other large ticket item on credit. It is also a good idea to limit the credit card use until the house is purchased and closed,” said Tony Cannon with The C Team Real estate in Cedar City, UT.

What to do with your credit report

When you get your credit report, check to make sure the information is yours. Check your name, address, and other identifying information. Check for outdated information. Liens, judgments, slow pays, etc. can only remain for 7 years, bankruptcies for 10.

Check for errors on your credit accounts. Less common than in the past, errors do still occur. Respond to errors by demanding the bureau either document its information or correct their mistakes.

Errors can include positive information you don’t see on your account. Just as you ask a creditor to remove outdated bad information you want to demand they include the good stuff.

Also look for zero-balance accounts which still have an “open” or “active” status. Any account, even one with an unused credit limit, affects your credit standing.

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