Your credit is a crucial part of the lender's decision on
whether you get approved for a mortgage or not.
Your credit score will also determine the rates and point
structure the lender will offer you.
Before we get started, go ahead and print this tip so you
have it for future reference...
You may think your credit situation is hopeless. Just
remember that there is always the chance to improve it, even under the most
challenging of circumstances. I have helped many people get into homes even
when their banks originally said no.
If you think you have perfect credit, this lesson will
still be of value since there is a real possibility that your report contains
mistakes you are unaware even existed.
Credit reporting agencies, or credit bureaus, collect information
about consumers' financial affairs and sell that information to their business
members, such as credit grantors, employers and insurance companies. The credit
bureaus normally charge annual fees as well as a fee for each credit report
requested by members.
The first step in the process is to get a copy of your
credit report.
Go here to get a copy of your free credit report now:
There are three credit reporting agencies in the country:
Equifax, Experian, and TransUnion. However, not every
creditor reports to every credit bureau. For example, Visa may report to
Equifax while your credit union reports to TransUnion and your auto loan
company reports to all 3 bureaus.
Credit bureaus obtain their information from three major
sources:
1. Consumers supply information, primarily from filling
out application forms for credit.
2. Public records provide information on such matters as
bankruptcies, court judgments, foreclosures and agreements registered.
3. The major credit grantors and collection agencies
regularly send their credit files electronically to the credit bureaus,
resulting in files that include the account number, outstanding balance, and a
nine point scale indicating whether a payment was made on time or not.
You must first know how to read your credit report. The
grid below will show you what the letters and numbers on your credit report
mean.
Most credit reports use the same codes to report
information. Knowing what the codes mean can help you interpret your credit
report.
Type of Account
O = 30-, 60-, or 90-day account
R = Revolving open-end account
I = Installment and/or mortgage account
Numerical System
0 = Too new to rate: Approved but not used
1 = Pays (or paid) within 30 days of billing; pays account
as agreed
2 = Pays (or paid) in more than 30 days, but not more
than
60 days
3 = Pays (or paid) in more than 60 days, but not more
than
90 days
4 = Pays (or paid) in more than 90 days, but not more
than
120 days, or three or more payments overdue
5 = Account is at least 120 days overdue, but not yet
rated 9
7 = Making regular payments under wage earner plan of
bankruptcy act or similar arrangement
8 = Foreclosure or repossession
9 = Bad debt; placed for collection; suit judgement; skip
History Rating
0 0 0
$ $ $
30 60 90
How many times payments are 30, 60, or 90 days late.
If you have had a bankruptcy or other credit issue there
is a strong possibility that your credit report is incorrect. Many bills that
were included in your bankruptcy, or bills you paid in the past, may still be
showing up as past due. Often you may find collections on your report from
medical bills you thought were paid by your insurance company.
The good news is that you should be able to correct these
issues with a few documents and letters.
Correcting Errors on Your Credit Report
Make sure the following information is correct: Your
name; or names if you are or were married; Social security number; Date of
birth; addresses of places you've lived; names of places you've worked; pending
accounts and accounts that have been closed.
Ensure that nothing has been on the report longer than is
allowed by law:
*Bankruptcies must be taken off your credit history after
10 years;
*Suits and judgments, tax liens, arrest records, and most
other kinds of unfavorable information must be dropped after 7 years.
Any error that you find must be investigated by the
credit bureau with the creditor who supplied the data. The bureau will remove
from your credit report any errors a creditor admits are there. If you disagree
with the findings, you can file a short statement in your record giving your
side of the story. Future reports to creditors must include this statement or a
summary of it.
The Fair Credit Billing Act requires creditors to correct
errors promptly and without damage to your credit rating.
The law defines a billing error as any charge for
something you didn't buy or for a purchase made by someone not authorized to
use your account; for something that is not properly identified on your bill,
or is for an amount different from the actual purchase price, or was entered on
a date different from the purchase date; for something that you did not accept
on delivery or that was not delivered according to agreement.
Billing errors also include: errors in arithmetic;
failure to show a payment or other credit to your account; failure to mail the
bill to your current address, if you told the creditor about an address change
at least 20 days before the end of the billing period; questionable items, or
any item for which you need more information.
Once you have written about a possible error, a creditor
must not give out information to other creditors or credit bureaus that would
hurt your credit reputation until the matter is resolved. Until your complaint
is answered, the creditor may not take any action to collect the disputed
amount.
As of December 1, 2004 the Fair Credit Reporting Act
allows you to get one free comprehensive disclosure of all of the information
in your credit file from each of the three major credit bureaus once per year.
Go here to get your free report now:
In the next lesson I will be covering if a down payment
is really needed. Stay Tuned.
Chris Rowe
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