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Review Your Credit Report

Review Your Credit Report

Check Your Credit Score When Preparing to Apply for a Mortgage

When applying for a substantial amount of money such as a mortgage, the first step anyone should take should be to make sure all your credit scores are the highest they can be.

Your credit report is primarily based on your trade-line and payment history, debt levels, and other information gathered by the three credit bureaus (Experian, Equifax and TransUnion). From that they calculate your credit score and assign a number between 300 and 850. 850 is the best.

Lenders use that score to determine whether to accept a loan application and the rate they will charge. That’s why it’s important to make sure your information is correct. You’re entitled to a free credit report once a year from each of the three credit bureaus.

Breakdown of Credit Scores and What They May Mean to You

700+ Credit Score – Excellent

A credit score over 700 means excellent or very good credit. Basically, the higher the score the lower your rate because you’re considered less risk to the lender. Your credit is or near flawless!

680 – 699 Credit Score – Good
A score in this range means good credit. You should be able to qualify for most loans but you may be paying a slighter higher rate than those offered to borrowers with excellent credit. You may benefit from a professional credit analysis.

620 – 679 Credit Score – Fair
Although a credit score in this range is still considered okay by many lenders, you may not get approved as easily as a borrower with a higher score. You probably won’t qualify for the best rates either. Your credit may benefit from credit repair.

580 – 619 Credit Score – Poor
Scores in this range are below average (subprime) and you’ll have a tough time getting a loan or even a credit card. If you score in this range you should work to improve your credit score because you’ll be paying higher interest rates just to get credit approval. Your credit is in need of repair.

500 – 579 Credit Score – Damaged
A credit score in this range usually means you’ve had a collection, charge-off, a foreclosure or a bankruptcy. Your credit is in need of repair.

Why You Don’t Need to Pay for Your Credit Score (Part I)

Why You Don’t Need to Pay for Your Credit Score (Part I)

Maybe you’ve seen some of the news reports, such as the one broadcast by KUTV in Salt Lake City, Utah, about companies “scamming” people with regard to their credit scores.

According to the February 4, 2014 KUTV news report, consumers have been complaining that they’ve paid for their credit score, but when they go to buy a house or a car, they learn the score they have doesn’t match the score used by the lender.

Consumers have filed complaints because they’re being denied loans or being charged higher rates.

In Part I of this two-part post, you’ll learn some basic facts behind FreeCreditReport.com – a site that offers credit reports and credit scores – and why the site is a little misleading. In Part Two, you’ll learn why lenders view credit scores from these sites as meaningless.

How FreeCreditReport.com works

Owned by Experian, FreeCreditReport.com offers consumers a way to get their credit reports and credit scores.

When you arrive at the site’s home page, you’re offered two options: You can get your free credit report by filling out a form, or you can purchase your credit report and credit score for $1.00.

Don’t ignore that disclaimer!

If you go straight to these two options, which most people would do since the calls-to-action are so prominent, you completely miss the disclaimer at the top of the page.

The disclaimer explains that when you purchase the $1.00 option, you’re signing up for a membership. If you don’t cancel your membership within seven days, you’ll then be charged $12.99 a month – indefinitely!

You shouldn’t be paying for credit reports

Interestingly enough, the disclaimer includes a link to annualcreditreport.com – a website authorized by the new Consumer Financial Protection Bureau as being the “official” website from which to order your free credit reports.

To be clear, as a consumer you are guaranteed access to a free copy of your credit report, from each of the reporting bureaus, once a year.

You can obtain your three free reports every 12 months (say every January or June) or you can request a report from a bureau once every four months – like this:

  • Experian in January
  • Equifax in June
  • TransUnion in September

This type of schedule ensures you’re constantly monitoring your credit.

You also get a free copy of your credit report when you apply for a mortgage. Lenders are required to send you copies of your credit reports. Your lender will usually tell you your credit score, too. If your lender doesn’t – ask. Your credit score isn’t confidential information.

(Be sure to see our post on how to determine what your credit score means.)

Stay far away from sites like this

Speaking as a mortgage broker, I recommend that you stay far away from freecreditreport.com and other sites like it. The marketplace is full of noise about identity theft and mistrusting mortgage lenders.

Sites like freecreditreport.com are fanning the flames of fear to generate additional profits for the credit bureaus backing them.

In Part Two of this post, you’ll learn the difference between the various types of credit scores and why lenders only rely on the scores of reports they’ve pulled themselves.

In the meantime, if you’re in the market for a home loan or have been considering a refi, give us a call. We’re here for you.

FAQs

Restore Damaged Credit

Restore Damaged Credit

Many prospective borrowers are unable to qualify for low rates or obtain loan approvals because of damaged credit, late payments, bankruptcies or foreclosures.

Often times credit reports can contain old medical collections or errors that may impact consumers’ credit scores. This derogatory credit can be frustrating for many homeowners who would otherwise qualify for a new home loan.

We Have Great News

Sometimes all it takes is a small credit score increase to get qualified. Don’t let a few blemishes prevent you from lowering your rate or consolidating your debt. You could be just a month or two away from being able to qualify for a mortgage that can save you thousands of dollars.

It’s never too late to begin the restoration process. The fastest and easiest way to resolve an inaccuracy on your credit report is through the online Credit Report Dispute process located on each of the three major credit bureau websites – Equifax, Experian and TransUnion.

Once your dispute is completed, please contact us for a new credit report. Thank you and good luck!