Credit Score Oveview For A Mortgage

Although your credit report is distinct from your credit score and credit score, the score is derived from it. You should also view credit reports from all three major reporting agencies. Your score is a sort of report card. Fair Isaac & Co., the FICO scorekeeper, assigns you a number based upon your credit report. You have three FICO scores because there are three credit reporting bureaus. These are the scoring factors.

Credit Checklist

• Paying history

  Have your bills been paid on time?

• The amount owed

  How much is your total debt?

• Lending history

  How long have your credit histories been? Mortgage lenders would like to see credit history.

• Apply for credit

  Do you need new credit?

• Types of credit

  Lenders love to see all types of credit: student loans, car loans, and bank cards.

What Is An A+?

FICO scores can range from 350 to 85; 850 is the holy grail of credit scores, and 723 is the median score in the U.S. However, you can still expect mortgage interest rates to be good at the 720-760 level and higher.

If you receive a lot of zero-percent credit cards or lines of credit offers, it is likely that you have good credit standing.

If your credit score is 580 or higher, you can get a loan FHA loan.

FICO is the most common way mortgage lenders determine your interest rate and what type of loan you are eligible for. But, as interest rates rise, this can make a difference.

Free Reports

Your credit report is now easy to obtain. The federal regulation, which was in effect in December 2003, allows consumers to get one free credit report each year from Equifax, Experian, and TransUnion. It takes approximately 10 minutes to generate the online report after answering a series of security questions.

www.myfico.com allows you to access your FICO score. A FICO score is approximately $15. However, this cost could save you thousands of dollars over the lifetime of your mortgage.

Credit Score Ranges

How can you tell the difference between a good and bad score? This is a grey area because different scores are calculated differently. Different creditors use different scores, and no one can know exactly how they were calculated since the formulas used by these companies are proprietary. The average score is 687. Below is an example of how credit scores are calculated:

• Excellent credit = 720 or more

• Good credit = 660-719

• Fair credit = 620-659

• Poor/bad credit = 619 or below

How Credit Reports Can Affect Your Mortgage

Before you begin house hunting or get pre-approved for a loan, make sure to check your credit score and your FICO score. What is the reason? Why?

You can correct any errors in your credit report and clean up bad ratings by checking your credit rating before buying. According to one lender, it can take up to 90 days to remove incorrect and expensive information from your credit report. However, some potential borrowers claim they get their reports back much faster.

What Is In A Credit Report

Credit reports provide a record of your borrowing history and repayments to banks, credit card companies, and other lenders. Lenders use the credit report to determine if you are a good risk or a safe bet when you apply for the money. The lender also bases the interest rate they offer on this credit report and the resulting credit score.

Credit reports include:

• Credit history. This information includes information about your accounts, including payment history and information about accounts that were sent to debt collection agencies. This includes information about the types of accounts and your standing with them.

• Who is reviewing your credit? All inquiries made by lenders or other people about your credit are recorded.

• Any judgments you receive, including bankruptcy.

• Personal information about you, including your current and past addresses, Social Security number, and information about your former employers.

• If you have ever disputed any of the details in the report, you can make comments.

How To Request A Report

Three major credit-reporting agencies are Equifax, TransUnion, and Experian. In addition, you can receive a free copy of your credit report once a year from AnnualCreditReport.com, which gets the reports from each of the three companies.

The good idea is to have a copy each year so you can inspect it for any errors. For example, you may find errors in your name, Social Security numbers, or account listings that are still open but have closed. This can be a problem when applying for a mortgage.

You will also find out if you were the victim of identity theft on your credit report. The report will also reveal any changes to your personal information, such as Social Security numbers.