It's cold outside but many are thinking about a buying a new home this year. Now is the time to check your credit report and make sure there aren't any surprises. I had a client just this week find out that one of her credit cards was showing a late payment and it was an error. Errors like that may stop you from getting a new home or from getting the best interest rate available.
There is a free option to get your own credit report each year. You can go to www.annualcreditreport.com and pull one or all three credit bureaus to see what is on your report. This will not give you a score, but does give you accurate information and will not count as an inquiry on your credit report. Mortgage credit scores tend to be different (typically lower) than other scores you can pay to see online. The reason to use this report is to look for information that may be reporting wrong.
Make sure you are not late on any mortgage, installment or revolving debt. A 30 day late payment on your mortgage may stop you from refinancing for 12 months – it may also stop you from buying a new home. Student loan payments are frequently reported as more than one tradeline. You may only make one payment, but on your credit report it may show 3-4+ tradelines for that same debt. If you make the payment late, it's now 3 or 4 late payments, not just one.
Keep your credit card balances low. How you use your credit cards tells lenders a lot about you. If you max out your credit cards, your credit score will be lower. Pay down the balances to keep the available credit at more than 50%. Ideally you want your credit card balance to be about 25% of the limit. Do not close your credit cards. If you do that, you lower your available credit and it will hurt your score.
If there are errors on your report, the best thing to do is contact the company reporting the error and ask them to update the report. I would also ask them to send you documentation showing the late is wrong or the collection is paid – whatever it may be. Then you can also update the credit bureau yourself. The credit bureau is suppose to update the tradeline within 30 days but sometimes it takes longer.
By checking your report now, you will allow yourself time to make any necessary corrections to improve your score. Check with your loan officer to see if there is anything else you need to do to be ready to buy! Feel free to call or email me if you have any questions on your credit report.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants – Email – Website
