Credit Checks and Home Buying
Credit checks are an important part of the mortgage application process. Lenders use them to determine the chances of a buyer paying back the loan. The best interest rates go to the borrowers with the best credit history. If your credit score falls even a couple of points below your lender’s cut-off point, it could add up to you paying thousands of dollars extra over the life of the loan.
Once a year, anyone can obtain a free credit report from each of the three major credit bureaus – Equifax, TransUnion and Experian – through the Annual Credit Report website (www.annualcreditreport.com). The report includes your credit accounts, whether they’re in good standing and any potentially negative items. To obtain your FICO credit score (the numerical ratings the bureaus give you) you will have to pay extra. It is recommended that you check your credit three to six months before going house shopping to give you time to work on any problems.
Another website that’s free to join is Credit Karma (www.creditkarma.com) the information is provided by TransUnion. This website is fantastic for monitoring your credit score. This site gives many tips to improve your score as well as a grade for your current score on an A to F scale. An email is sent monthly from Credit Karma showing
your current score and any information that may have changed on your report. Credit Karma uses its own credit rating algorithm for the score they display. Your true score will vary from each credit-reporting agency.
Each agency has their own reporting method and certain debts may only appear on one or two of your credit reports. Quizzle (www.Quizzle.com) is the free site provided by Equifax. Credit Sesame (www.Creditsesame.com) is the free site provided by Experian.
Common derogatory marks against buyers are usually simple to fix. Examples of derogatory marks include an unpaid utility bill or collections for medical bills. If you’ve paid off a loan that’s listed as still carrying a balance, or if you have a bankruptcy on your report that never happened, clearing up the errors will improve your credit score. Once you’ve checked your credit report and noted the errors or negative marks, a negotiation with the creditor should be initiated. If the negative mark is an error, then you will need to dispute the error with the credit reporting agencies directly. Disputing erroneous marks on your credit report is free.
It is imperative that you make no new purchases with your credit during the home buying process. This is also the worst possible time to let any bills slip through the cracks. Stay current on all your credit card payments and other bills. A good rule of thumb is to keep credit cards under 20 percent of your credit limit. A missed payment close to
your looking for a mortgage will count more than a missed payment in the past. This does happen to many potential buyers. Don’t let it happen to you.
For more information, please contact Brandon DeJesus at 239.285.5010 or email him at email@example.com
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