If you’re trying to buy a home in today’s market, then you need to do everything possible to ensure your credit report is as good as it can be.
And just what is a credit report? It’s a record of all your debt and repayment history, which is kept by credit-reporting bureaus, the main three of which are Equifax, Experian and TransUnion.
According to the Federal Trade Commission (FTC), credit bureaus are required, upon consumers’ request, to provide a free copy of their credit reports up to one time every 12 months. And that’s each bureau per person, not per couple. In other words, even though spouses jointly hold most of or all of their credit accounts, each individual has the right to check all three bureaus’ reports at once. For example, you may request a report from one of the bureaus every four months, thereby verifying credit information for free up to three times a year. You and your spouse can stagger credit report checks, enabling you to see one every other month.
Requests can be made online at www.AnnualCreditReport.com or by calling toll free 1-877-322-8228. You’ll be able to see your entire credit history, and you may be surprised to see long-unused credit card accounts still open. If you do spot any of these accounts, then contact the individual creditors and close the accounts immediately. Remember, paying something off doesn’t necessarily close the account. Keeping a vigilant check on your credit report not only helps you check for open accounts but it also gives you a better idea of your credit rating and enables you to catch errors so you can provide the necessary information for the bureaus to make corrections.
Note that AnnualCreditReport.com is the only authorized site for the free reports. Many similar sites are out there, such as www.FreeCreditReport.com, all of which are far from free, charging monthly monitoring fees and other expenses for their services.
When asking for your report, for a nominal fee (under $10), there will also be an opportunity to see your actual credit score and to receive additional information. But before you part with any money, be aware that if you’re applying for a mortgage loan and using a lender that uses credit scores as part of its application process, then the lender is required to provide you with your credit score for free. To learn more, visit the FTC’s Web site www.FTC.gov.
What exactly is a credit score? It’s a three-digit number assigned to your credit report and based on your income history and the timeliness and consistency of your debt repayments. The higher your credit score, the easier it will be to find a lender who welcomes your business and the more likely you’ll be able to negotiate a lower interest rate.
What’s a good credit score? It varies depending on what you read. With 850 as the top score, a credit rating of 700 out of a possible 850 is considered very good. Most financial gurus agree that 720 is the target score for getting the very best rates and that 620 is about as low as you can go and still hope to get a really good rate on a mortgage.
1. While closing out paid-off credit card accounts is generally good, the time not to do that is when you’re applying for a mortgage. A closed account will not carry the positive weight of a responsibly managed open account.
2. Don’t open any new accounts.
3. Don’t miss any payments on anything. A single payment that is 30 or more days late can wreak havoc on your credit score.
4. Don’t co-sign other people’s loans. Anything you co-sign for, you’re responsible for, and the debt shows up as yours.
5. Don’t allow other people to “use” your credit. If your friend or relative is an unreliable credit risk to a lender, then he or she is very likely to damage your credit and your relationship.
Do you have to owe money to get money? No. Lenders want to see a credit history in order to see how trustworthy you’ve been in paying your obligations.
This means they’ll also look at your track record for making payments such as utilities — power, water, gas, sewer — home phone, cell phone, Internet service, cable or satellite TV, etc. Prompt payment on all these things has a positive effect on your credit score.
EDITOR’S NOTE — For more money-saving advice, visit Judy Bates’ Web site www.Bargainomics.com.
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