Credit Reports

You credit history makes up the report.  Creditor names, account open dates, credit limits, amount owed, monthly payment amount, any past due balance, the history of payments on that account, recent credit inquiries and public records – these items are normally on a credit report.  In the mortgage industry we normally pull a ‘tri-merged’ credit report – merges the credit data of the three major credit bureaus.  Also mortgage lenders like to see the fico score.  Most lenders use the middle fico score (or lower of two if there are only two scores computed)

What’s a FICO Score?

 The FICO® Score is a number that summarizes your credit risk. Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan.  – Fair Isaac  The fico score is intended to be a predictor of the likelihood a consumer will perform on a new debt.  The higher the fico score, the greater the chance of the loan being paid as agreed.  Not everyone has a fico score, there must be sufficient recent credit activity.

Credit Report

Your Rights Under the Fair Credit Reporting Act:

  • You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.
  • You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
  • Any company that denies your application must supply the name and address of the credit bureau they contacted, provided the denial was based on information given by the credit bureau.
  • You have the right to a free copy of your credit report when your application is denied because of information supplied by the credit bureau. Your request must be made within 60 days of receiving your denial notice.
  • If you contest the completeness or accuracy of information in your report, you should file a dispute with the credit bureau and with the company that furnished the information to the bureau. Both the credit bureau and the furnisher of information are legally obligated to investigate your dispute.
  • You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

The Three Major Credit Bureaus and How to Get Your Free Annual Credit Report:

Equifax:   (800) 685-1111
Experian: (888) 397-3742
Trans Union: (800) 916-8800

Visit Free Annual Credit Report for your free annual credit report.

What can I do to improve my credit score?

Everyone’s profile is different and credit events will affect us in different ways, but there are some general best practices to follow:

  • Pay all bills on time - A single, recent 30-day late payment can have a significant impact.  A history of periodic late payments is an even larger issue.  Be disciplined about paying the bills on time.
  • Length of credit history – the longer the better! Think twice about closing that store card you opened in 1986.  Conversely, new credit  accounts will often reduce a fico score. 
  • Avoid New Inquiries -  In the short term the number of credit inquiries can lower your fico score.
  • Mix of credit – optimally a mix or mortgage, installment and revolving debt seems best.  Owning no credit cards may seem less risky but fico scoring gives advantage to those who have demonstrated they can successfully manage revolving debt like credit cards.
  • Outstanding Revolving Debt – The amount you own one credit cards and revolving debt (line of credit) in proportion to the credit limits is a close #2 factor behind timely payments in the fico score calculation.  Try to maintain owing 30% or less of your total e card limits.  Closing those old cards you do not use may lower your fico score if you carry balances on other credit cards.
  • Collections, Charge Offs, Repossessions, Judgments Etc. – try to avoid major derogatory credit items like these.  Even if you dispute a bill say in contact and do what you must to protect your credit history.
  • Bankruptcy and Foreclosure – these events will normally have a waiting period from the time they are closed out until a person can get a new mortgage loan.

A borrower with a credit score in the mid 600s on average will pay twice as much in interest expenses during their lifetime compared to a person with a credit score in the mid 700s or higher.  Your credit history is an asset!