Getting Your Credit Report
A good credit rating is very important. The information in your credit report can make or break your mortgage, refinance or home equity loan application. Knowing what is in your credit report -- before you apply -- is vital. A recent article in USA Today shows that a consumer group found that "One in four credit reports has errors serious enough to disqualify consumers from buying a home, opening a bank account or getting a job." Don't let a mistake on your credit report prevent you from getting your home loan.
Your credit report contains your current and previous addresses, information about how you pay your bills and whether you’ve been sued, arrested or gone bankrupt. Consumer reporting companies sell the information in your report to lenders to evaluate your application for a mortgage, refinance or home equity loan.
Most mortgage lenders also calculate your credit score. Many lenders use a credit scoring system by Fair, Isaac and Company, known as FICO. Your FICO score is based on the information in all of your credit reports such as how long you have had credit, how often you pay your bills late and how much you already owe. FICO takes all this into account and through statistical analysis of consumers with similar situations calculates a credit score between 350 and 950. If your credit score is above 680 you are considered a 'prime borrower' - one the banks want to lend money to. If your FICO score is between 560 and 680 you are a 'sub prime' borrower. You probably can still get a mortgage or home equity loan, but you may need work with a lender that specializes in sub prime loans. If your FICO score is under 560, you are likely to find it very hard to get a mortgage or home loan.
How do you find out what's in your credit history?
There are three national consumer credit reporting companies:
Equifax, Experian, and TransUnion. They are required to give you
a copy of your credit report -- free -- once a year. They can charge
up to $9.50 each for additional reports. You are also
entitled to a free copy of your credit report if you are
turned down for your home loan. There are also services such as
myFICO.com that
will save you the trouble of writing to each credit bureau to request
your report. myFICO.com can provide you with your credit reports
and credit score from all three of the credit bureaus. You may be able to immediately download
all of your credit information.
What If There Are Errors In Your Credit Report?
If you spot a mistake in your report, you can file a dispute
with the credit bureau and whoever gave them the mistaken information.
The credit bureau is required to investigate your claim. If the
bureau agrees that the information is wrong,
they are required to correct it. The Federal Trade Commission
has a free pamphlet to show you how you can handle the dispute
yourself: How
to Dispute Credit Report Errors. Many people prefer using a lawyer to protect their rights in a dispute with the
credit bureaus. Two
law firms that specialize in correcting problems on credit reports --
and are reasonably priced -- are:
Lexington Law Firm
and
the Ovation Law Firm
What If Your Credit Isn't Perfect?
We've all faced things that can lead to temporary financial problems - losing a job, illness or sudden unexpected expenses. Sometimes our credit isn't perfect. If you check your credit reports and they show problems that turn out to be accurate there are steps you can take to rebuild your credit. Our article on repairing your credit offers some practical steps you can take. The FTC has a pamphlet online that explains Credit and Your Consumer Rights.
If all else fails, there are lenders who specialize in loans to people without good credit. Companies like
Abacus Credit & Loan work with borrowers who have had credit problems in the past. Even if you have bad credit, they probably can work out
a mortgage or personal loan for you.