Maintaining good credit is vital to your financial health. Your credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or have filed for bankruptcy. Nationwide credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
The credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time. Each score is based on the information in your credit report.
FICO is the largest provider of consumer credit scoring models used in credit approval and the model that lenders use most. While different companies may use other similar models, credit scores typically range from 300 (bad) to 850 (excellent). The scoring models all consider five core components to determine your three-digit score.
- Your payment history (35%)
- How much you owe (30%)
- Length of credit history (15%)
- New Credit (10%)
- Other Factors (10%)
Curious about your credit history, the Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. To comply with this federal law each of the three major credit reporting companies formed www.annualcreditreport.com. At this site, you can request a copy of your credit report once every 12 months from each of the three major credit reporting companies.
While you can get a free copy of your credit report to verify the accuracy of information in your credit history, you will still have to pay to find out the three-digit number, also known as your credit score. Unfortunately, the law has no requirement for the credit reporting companies to provide you with your three-digit credit score.
Prior to beginning your home search or mortgage application process, it is always a good idea to review a copy of your credit report. While it is not common, there can be errors on your credit history. These errors might make the difference in getting or not getting approved for a mortgage. If you find errors, each of the three major credit bureaus has appeal processes designed specifically for getting errors on your credit report corrected.
Credit Report Dispute Sites
Lenders will always review a copy of your credit report and your credit score when you apply for a mortgage. However, many home buyers do not realize that all lenders will also review an updated copy of your credit report just prior to closing. If anything on your credit report has changed since you submitted your original application, you could be denied at the last minute. A few simple rules can be followed to ensure you don’t end up loosing out on your dream home.
To find out more check out our guideline of do’s and don’ts after mortgage application.