Checking Your Credit

The US is a credit economy: we borrow money to buy houses, cars; we even use credit cards to buy our groceries and gas.  One of the main tools to make this widespread use of credit possible is the credit report. 

You most likely have one, and if you want to buy a home, you need to know what’s in that report and make sure it is correct.  The sooner you check yours, the more time you’ll have to make corrections and the better off you’ll be.

Your History As A Borrower

Lenders are like anyone else, they don’t want to lend money to people who might not pay it back.  So when you apply for a loan, they will run an in-depth credit report to find out whether you have been a responsible borrower or not.

Credit Reports:

The three major credit reporting agencies in the United States are:

  • Equifax
  • Experian
  • TransUnion

There is a fourth one called Innovis, and many local or regional companies, but the big three are the ones most likely to have an impact on your ability to get a mortgage.

What’s in it:

The information contained in your credit report is usually your:

  • Name, current and any past names used (maiden name, names from previous marriages, etc.)
  • Current and former addresses
  • Social Security number
  • Birth date
  • Open financial accounts (loans, credit cards, etc.)
  • Balance and credit limits for those accounts
  • Whether you pay them on time or not
  • Whether any of them have been or are in collection
  • Any legal suits, judgements or tax liens against you
  • Current  and previous employment information, possibly including your position title and income
  • Spouse’s name and data
  • Whether you own or rent your home

Make Sure it’s Correct:

This is important information, and it can make a big difference to a lender, so it’s critical that it be correct.  You want to make sure that all of the data is yours (and not from someone with the same name, a common problem) and that it accurately reflects your financial situation. 

Start Early:

It’s best to do this long before you start the mortgage process, in case you find problems.  It can take a long time to resolve disputes.

First American can help.  If you find problems, ask your lender about our consumer assistance service which can work with you to resolve any discrepancies in your credit file, and we’ll give you one person to talk to who will manage the solutions with all three agencies.

Then we will make sure the updated information is incorporated into your credit report and the revised version is reissued, this can often make a big impact on your score.

Credit Score:

Your credit score is calculated by a company called the Fair Isaac Corporation.  The exact calculation used to develop a score is a “trade secret,” but in general, it is based on:

  • 35% payment history
  • 30% dollar amounts owed on all accounts
  • 15% length of credit history
  • 10% number of recently opened accounts or inquiries
  • 10% type of credit used (credit cards, installment loans, mortgagees, consumer finance accounts, etc.)

Lenders care a lot about this number, and Fair Isaac uses information gathered from the three main credit reporting agencies. 

So the sooner you get copies of your credit report and make sure they are correct and complete, the easier it will be when you apply for a mortgage to buy that perfect home.

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