November 3rd, 2014 2:55 AM by Jackie A. Graves, President
Lenders want to give you a mortgage, but they also want
to minimize their own risk. The easiest way to retard risk is for them to use
your credit scores to make their lending decisions.
Credit scores are compiled separately by three consumer
reporting agencies -- Equifax, Experian, and Trans Union. These credit reporting bureaus calculate scores differently,
based on formulas and criterias of their own devices.
Equifax Beacon 5.0 Facta: scores range from
334 to 818.
Experian Fair Isaac V2: scores range from 320
Trans Union FICO Risk score Classic 04:
scores range from 309 to 839.
Your credit score is a number that reflects the
information in your credit report based on whether you pay your bills on time,
how much you owe creditors, accounts you've paid off, and derogatory
information such as unpaid bills, late payments, judgments and liens. It also
includes inquiries into your accounts from lenders, landlords, and employers.
When you apply for a home loan, your application includes
giving your lender permission to "pull your credit" and decide
whether to lend to you and the rate of interest on the information contained in
your credit scores. The higher the score, the better terms you'll receive from
Once your credit scores are reviewed by your mortgage
lender, you'll receive a computer-generated report of the findings, but it won't
have a copy of your entire credit report. It may include key factors that
adversely affected your scores. Some examples might include:
Too many inquiries in the last 12
since most recent account opening is too short
of loan balances to loan amounts is too high
many accounts with balances
owed on revolving accounts is too high
What if you're declined for the loan, or your lender
wants to charge a higher interest rate than you were expecting? Is there
anything you can do?
Yes, talk to your lender and ask for help repairing or
correcting your scores. For example, you may have innocently done something
that resulted in a negative score, such as closing a line of credit. Or, you
may not have realized that a late payment would bring your score down as much
as it has. The lender will tell you exactly what you need to do to raise your
Under federal law, you have the right to obtain a free
copy of your credit report from each of the national consumer credit reporting
agencies. Go to FreeAnnualReport.com.
If you find an error -- derogatory data that doesn't
belong to you, or an account that shows the wrong balance, simply show the
lender your canceled check, release of lien or other proof that the credit
report is wrong.
You'll also have to correct the information yourself
separately and in writing with each agency. It may take a few weeks for the
agencies to record the updated information.
In the meantime, work with your lender and do what he/she
tells you to do to get the best rate, including paying more than the minimums,
paying on time, and making sure that your debt-to-income ratios are well within
your ability to repay all your loans.
Written by Blanche Evans | To view the original article