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Credit Reports and Your Mortgage, Credit Scores

Before you start house hunting and getting pre-approved for a home loan, check your credit report and get your FICO scores. Why? Your credit rating may be the single most important piece of financial information you have to obtain a mortgage at the best interest rate.

Checking your credit rating before you purchase will give you time to correct reporting errors and to clean up your ratings if they are in the dumps. One lender tells us that it can take up to 90 days to get erroneous — and costly — information off your report, although some prospective borrowers say they have a much quicker outcome.

What's in a Credit Report?

Credit reports are a history of your track record of borrowing and repaying banks, credit card companies, and any other lenders. When you apply to borrow money, the lender uses the credit report to decide if you are a safe bet, or a risk. They also base whatever interest rate they offer on that report and the resulting credit score.

A credit report includes:

• Credit history. This includes account information detail, such as your payment history, and specifically information about accounts that may have been sent to debt collection agencies. It also includes the number of accounts you have and the type of each, and if you are in good standing with each.
• Who is examining your credit. Any inquiries by lenders or others about your credit is recorded as well.
• Any judgments against you, such as bankruptcy.
• Personal information about you, such as your addresses (current and past), Social Security number and your previous employers.
• A section for comments by you, in the event you have disputed the report specifics in the past.

How to Request a Report

There are three major credit-reporting agencies: Equifax, TransUnion, and Experian. 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.

It is a good idea to get a copy annually so that you can check it for errors. Errors range anywhere from name misspellings and incorrect Social Security numbers to accounts being listed as still open when in fact they have been closed — an error that can hurt you when you need to get a mortgage.

Your credit report also will show whether you have been the victim of identity theft. If your personal information, such as your Social Security number, has been changed, the report will reveal it.