Lenders use your credit score, a ranking based on your bill paying history, to determine the risk of lending you money and the likelihood you will repay the loan on time. If you have a lower credit score , you’re considered a higher risk and may have a harder time obtaining a mortgage, at the rate you want, than other buyers with a high credit score.
The first step in the home buying process is to find out what your credit score is, fix any errors and take steps to improve your credit if necessary. Here are some tips to help get you started.
Obtain your credit report
Credit reports are maintained by three credit reporting companies: Equifax, Experian and TransUnion. The most important items found on a credit report are:
Your credit payment history,
Whether you make your payments on time
Whether you’ve run into serious credit problems in the past.
Each bureau gives you a different credit score because they each use different formulas to calculate it.
The Fair Credit Reporting Act entitles you to one free credit report per year from each credit bureau. You can get these directly from the bureaus, from a variety of websites like AnnualCreditReport.com or from a mortgage broker like Metro Brokers Financial.
If you find any mistakes on your credit report, like a bill that is not yours, start trying to get it corrected immediately. Visit the credit bureau’s website for instructions on how to begin the correction process. You will want to:
Submit a written request to the bureau
Keep a copy for your records
Keep records of any communications between you and the bureau
Follow up regularly
Improve your credit score
If your credit score is lower than 700, you may want to work on improving your credit score before applying for a mortgage because you may not be eligible for the best rates.
The Credit Doctor is a tool designed to diagnose your credit health and (in some cases) prescribe a plan of action that could potentially change your credit score.
Make sure to pay all of your bills on time and do not incur any new debt, especially if you’re getting ready to purchase a home. This can prevent you from getting the same low rate you were originally offered (or derail the closing altogether). Also look at paying down some of your debt, like your balances on credit cards.
Your best bet is to talk to a mortgage broker to help get the process started.
Metro Brokers Financial, Inc., 5775-D Glenridge Drive, Suite 200, Atlanta, Ga. 30328 A Georgia Residential Mortgage Licensee # 5892. NMLSR Unique Identifier # 163853. 404-847-2525