YOUR CREDIT HISTORY -

It's a good idea to check your credit report regularly, but particularly before applying for a loan. Your credit history is one of the factors lenders will consider when deciding what kind of loan you qualify for and the credit terms they will offer.

 

Your credit report and score reflect your credit management history, so you can't improve them overnight. But there are steps you can take to make sure you have the strongest credit history possible when you're ready to apply for a loan.

 

Get your credit report and FICO® Score in advance. For a home purchase, check your credit six to 12 months before you want to buy. If you know your credit score early enough, and it's lower than you'd like, you may have time to improve it. There are no quick fixes, but it's also never too late to start good credit management.

 

Have co-applicants do the same. Even though a credit score is generated on an individual basis, each lender has its own policy for dealing with joint loan applications. Some consider an average of the scores, others use either the lowest or the highest, while some use other calculations. By having co-applicants obtain their credit reports, you can be prepared for any situation.

 

Remove errors from your credit report. An important step is to make sure your credit report is free of errors. If you find an error and report it to the credit reporting agencies, they are required to investigate and respond to you within 30 days.

 

Be aware that even if you check your credit report, your lenders will still need to obtain their own credit report when you apply.

 

Reduce Your Debt

 

Lenders will consider your debt-to-income ratio. If you have outstanding loans or credit card debts, try to pay off as much as possible. Don't add to your debt by making big credit card purchases before you apply for additional credit.

 

Since acceptable debt-to-income ratios differ from lender to lender, talk to a mortgage representative about the loan you're interested in. In some cases, a high debt-to-income ratio can be offset by other factors more favorable to you.

 

If You Have Less Than Perfect Credit

 

Don't despair if you have less than perfect credit. While it's good to do what you can to improve it, lenders have programs that accommodate many financial situations.

 

If you haven't established credit, many loan programs guidelines allow a non-traditional credit history of your paid receipts and canceled checks for rent and utility payments. This can help you document a pattern of paying your monthly obligations on time.

 

Late Payments

 

For most people, problems with their credit report are likely related to late payments on a debt. If you were late one month in paying off your credit card, but otherwise have a good payment history, chances are most lenders won't be too concerned. But if you have a history of late payments you'll need to document the reasons why. A slow payment history won't necessarily get you turned down for a loan, but you may have to pay a higher rate of interest or otherwise prove to the lender that you can repay your loan in a timely fashion.

 

Errors On Your Credit Report

 

Many people are surprised to learn that credit reports can often contains errors or inaccurate information. If this is the case with your credit report, you'll need to contact the reporting agency or creditor to have the problem resolved. This can sometimes be a slow process, so make sure to give yourself time to clear up the mistake.

 

Bankruptcies and Foreclosures

 

There's no getting around it, a bankruptcy on your credit report is not a good thing. But that doesn't mean you still can't obtain a loan. Even though a bankruptcy may stay on your credit report for seven to ten years, lenders will often consider the circumstances surrounding a bankruptcy (family illness, injury, etc.). Moreover, if you have reestablished good credit since the bankruptcy, a lender will be more inclined to approve your application.

 

 

 

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