Buying a home is something most people dream of being able to do at some point in their life. All you have to do is save enough money for a down payment and you’re in. Right? Maybe not. If your credit rating is not up to snuff, the road to your dream may be a little bumpy, but not impossible to overcome.
Everyone is entitled, by law, to see their official credit score once a year from all three credit reporting bureaus. In the United States, there are three credit bureaus, or credit reporting agencies (CRA), as they are also known. These include Trans Union, Experian and Equifax. Creditors will post your loan activity to all three bureaus, including both current and late payments. If you need to repair any credit damage (such as a late payment on your phone bill or car payment), you must check all three to ensure your rating improves in the eyes of all future lenders.
It is very important to stay on top of what the banks and other lenders are seeing every time you apply for credit. Even the smallest detail, something you thought was not a big deal, may appear on the credit bureau and drag down your credit score.
When you are applying for a mortgage, all lenders will consider your FICO score, named after the Fair Isaac Co. This company calculates your rating, then charges any institution that is doing a search on your credit history. Each CRA may also have its own system, as do the individual banks, or lenders.
When searching online for ways to see your credit report, you will invariably come across sites that offer your score for free. These are often misleading and you may end up giving information to companies who will charge you for their services, and give fake FICO scores. If you are careful in your research, you will indeed find the way to see your credit score without cost.
Your credit rating not only reflects on if you can get a loan or not, it also determines the rate calculation for your loan.
How do you rate?
If your FICO score is 760 or higher, you have an excellent credit rating, and should have no problem getting a mortgage if your down payment is within range. If your score sits between 700 to 759, your credit is considered good, but that may affect the rate of your mortgage by a point or two. If your FICO score is less than 700, you must make a concerted effort to build your credit back to the level where lenders will consider you a viable risk for a loan.
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