There is a direct correlation between your credit scores and the terms of your home loan. Or even the ability to get a loan. If you have a relatively high credit score with no delinquencies, then you can expect lenders to believe that you will pay on your loan faithfully. Banks will feel comfortable going forward with a home loan – with interest rates and conditions that will ultimately be favorable to you and your finances. Less than perfect credit causes them to pause.
So, it’s imperative check and clean up your credit report before starting the home purchase process.
Obtaining Your Free Credit Report
The Fair Credit Reporting Act requires that credit bureaus provide a free credit report at least, once every 12 months to inquiring people. Your credit report and your credit scores are an important aspect of your financial identity. Trans Union, Equifax, and Experian are the main credit bureaus who report your credit standing to lenders. They each allow you to obtain a free copy of your credit report each year.
What Should I Look for in My Credit Report?
Make sure that your personal information is consistent. Names should be spelled correctly, and your home address should be updated. If you notice a different address, then that might be a potential sign that someone has been using your identity to open credit accounts – and they were dense enough to route bills to your home or billing address. If there are, errors, typos or other mistakes you should contact the credit bureau and correct the mistakes so a mortgage lender won’t have questions or turn your loan down due to wrong information.
Check Your Credit Score Report for Erroneous Accounts
In the account section of your credit report, you will be able to view current balances that are owed. This section will show the date that you opened these accounts, as well as a limit that will need to be paid off. Report any accounts or business names that you are not familiar with. Check for inconsistent charge-offs or payments that are not aligned with your spending habits. Lingering inquiries can further affect your credit score. Watch for retail credit accounts which are unfamiliar. Again, if you find errors, then immediately contact the credit reporting agency. If you’ve received your credit report from a third-party, then contact them for any information about the potential error.
Good, accurate credit can be your friend in the home purchase process. Bad credit will get your loan denied before you even get started. Contact your lender in advance to see what the current credit score requirements are for home loans. Fix any errors or start an aggressive program to fix damage credit and you’ll on your way to buying your next home.
Questions about starting your home search? Contact us today! We can help make your home purchase an outstanding experience.