Credit scores have become so important when buying a home (or financing anything!). In the past, you needed to have good credit, but the score didn't affect your interest rate like it does now. Now if your score is below 740, more than likely there will be some type of increased cost to get a mortgage. Credit scores can also affect the cost of your homeowners insurance.
Because of this, you want to keep an eye on your credit report. The most important thing you can do is to pull a copy of your credit report once a year. The government has mandated that consumers have the right to see a copy of their credit report every year. The best website to use for this is www.annualcreditreport.com. When you use this website, it doesn't cost you any money and it is not an inquiry for new debt, so it doesn't affect your credit score. This website will not give you your credit score unless you go into the different credit bureaus and pay for that information. What you want to use this site for is to look at your credit report and make sure there are not any errors on your report.
After looking at your credit report, if there are errors or inquiries that you don't remember, you can contact each credit bureau and get additional information. The three main bureaus are Equifax, Transunion, and Experian. Not every creditor reports the same information to each bureau – in fact not every creditor reports to all three of them. Some may only report to one bureau which is why it is important to look at all three bureaus. If you need to dispute information on your credit report, you will want to send a letter with documentation showing the error.
If you have been through a divorce, you may want to look at any debt that you had with your ex-spouse. Make sure the accounts are closed and if there are any outstanding balances, you want to make sure the payments are being made on time.
Make sure you keep copies of any correspondence with the credit bureaus. Sometimes items that have been resolved show up later. If you have copies of that documentation, it's even easier to fix the second time around!
If you need to increase your credit score, there are several ways to work on that. The most important item is to make sure you make all your payments on time. If you have credit card debt, try to keep your balances at about 30-50% of the available credit. Maxing out your available credit will lower your credit score. If you have collections, pay them off and get a receipt. Mail that along with a letter of explanation to the credit bureau and ask them to remove the collection or at least to show it paid in full.
If you close revolving credit accounts, it can lower your credit score. When you close those accounts, it lowers your available credit and that hurts your score. Frequently people will open new accounts and close older ones, that also shortens your credit history and lowers your score. You will have a higher score by keeping older credit cards to show a longer credit history.
Once you have improved your credit score, you need to make sure it stays there. Check your credit once a year. If you have a loan declined, you have the right to see a copy of your credit report. Make your payments on time. All of this will make it easier to get a new mortgage at the best available interest rate.
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
