Just a little planning before committing to big purchases, like buying a home, can make the loan process flow much easier and faster. Before you start the mortgage application process, the first step is to check your credit information.
Your credit report and credit score are critical factors in determining whether you will qualify for a mortgage and the interest rate you can likely expect. Unaddressed errors or fraud on your credit report will slow things down and make the loan process more difficult. Here’s what to know and what to look out for.
Know the Difference Between Your Credit Report and Your Credit Score
Your credit report contains information about your credit accounts and your payment history. There are three major credit reporting companies – Equifax, Experian, and TransUnion. Each agency maintains a separate report on consumers. You have the right to a free copy of your credit report once per year from each of these companies. To get a copy of your credit report, you can go to www.annualcreditreport.com, or call 1-877-322-8228.
Once you receive a copy of your credit report, review it very carefully for errors such as incorrect names, addresses and employers. Also, look for accounts you don’t recognize, duplicate accounts, closed accounts still listed as open, incorrect balances, and any other information that’s wrong, or looks as if it could be fraudulent.
If you find errors or fraudulent activity after you review your credit report, you have the right to dispute it. Each credit reporting company’s website will have a link to a form for reporting inaccuracies and/or fraud.
Your credit score is a number based on information contained in your credit report. Blackhawk Bank uses a FICO score that ranges from 300-850. A FICO score of 720 and above is a good goal. It’s essential to have a good credit score to qualify for a mortgage with the best rate and terms.
Your credit score is based on this key information:
• Your payment history – on time payments vs. late and non-payments (including accounts sent to collections)
• How much you owe – the amount of debt you currently have
• Length of your credit history – how long you have been borrowing money
• Credit mix – a history of the different types of loans you’ve had (personal, auto, mortgage, HELOC, etc.)
• New Credit – how many accounts you’ve applied for or opened in the past 6-12 months
If you find that your credit score is a bit on the low side, a non-profit credit counselor/agency is one option to help make a plan to improve it. You can also speak directly to your mortgage professional. Blackhawk Mortgage Planners are always available to help with any questions or concerns regarding your credit report and score, as well as putting you in touch with a reputable credit counselor if needed.
Checking your credit history, fixing any errors, and knowing your credit score puts you in a good place when starting the mortgage loan process. Call or stop in today and ask to see a Blackhawk Mortgage Planner; we’ll help set you on the path to homeownership!
SVP Mortgage Banking
SVP Mortgage Banking