Credit Reports
- Credit reports are your lifeline in the financial word in regards
to obtaining financing. You want to be sure that your history is reflected
accurately. Many times people find out too late that their credit
report is not correct. It is a good idea to review your credit report
once every 3 months to insure all your account history is accurate.
Common problems on credit reports:
- Not your account
- Loans reporting a balance which have been paid off
- Collection accounts that are incorrect
- credit accounts discharged in bankruptcy
- Judgements that have been satisfied not reporting as satisfied
- Credit cards which you were only an authorized user on showing lates
- Many more
These problems can lead to lower scores and less than ideal rates.
Correcting your credit report is not an overnight task, so plan ahead
and make sure you have the most accurate credit profile as possible.
You can dispute your accounts individually, or you can hire a company
to work with you on fixing the incorrect information.
The first thing you need to do is gain access to your credit report.
You can buy reports from Equifax, Trans Union and Experian, the
largest credit reporting agencies. Buy a report from each, because
one may contain errors that affect your credit score.
When applying for a mortgage, your credit rating is one of the
first things a lender will look at. They'll be loaning you a large
amount of money, and if it seems that you are likely to default
on the loan, lenders will hesitate to loan you the money. Usually,
lenders compensate for this higher risk with higher interest rates,
so it is in your best interest to have a high credit score.
Credit reports that contain information from the three major credit
repositories are called Tri-merge Reports. Base on each individual's
credit history, the three repositories each assigns a numeric value,
called Credit Score. In addition to a credit profile free of negative
entries such as late payments and collection accounts, an acceptable
credit score is also important to mortgage lenders.
If you are looking to get a mortgage for a home then it might make
sense for you to contact your mortgage broker and have them pull
credit. Your broker or loan officer will go over the report with
you and let you know what needs to be addressed if anything. The
most important things is to pull you credit now. Don't wait until
you have a contract on the house because you may find that you need
time to work on some issues that show up on the report.
Your credit score is calculated as a statistical summary of all
the different information in your credit report, including
- History of Paying Bills
- How much debt you have outstanding
- length of time you've had credit
- number of cards and loans
- your credit limits
- the types of credit you have
You are entitled to one free credit report, from each of the three
reporting agencies, once a year. When obtaining a mortgage line
it is good to review your own credit history first. Banks and lenders
will rely on these reports to represent your willingness and your
ability to repay the monthly payments in a timely fashion.
If you find a account reporting in error, it is quite simple to
dispute an error online, directly with the agency reporting the
error. The websites for the three agencies, offer this service when
you order a report and the process of disputing an error is handled
directly online.
There are five major types of information used to calculate a FICO
score at any given point in time are listed below. Each type of
information counts as a percentage of a total FICO score:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of credit
