Credit Issues: What You Need to Know

What you WON'T find on a credit report.

What you will not see is your overall credit rating. There are companies that are separate from the credit repositories but who work closely with them to produce overall credit ratings for individuals, called credit scores. Credit scores are used increasingly by mortgage lenders to make decisions. For now, the credit scoring companies resist giving credit scores directly to consumers (a lender who pulls your credit score may choose to reveal your credit score to you, but the lender is not obliged to do so). Fair Isaac, the leading credit scoring company, justifies this by saying that "the number by itself might not hold much meaning to you." Imagine a teacher trying to justify keeping your grade a secret because "the number by itself might not hold much meaning to you." You can obtain your credit score when you apply for a loan if the lender is willing to provide it. Meanwhile, here are some things that can negatively impact your credit score: 1. Public record data that is less than 5 years old. 2. Credit accounts that currently are delinquent. 3. A track record of "serious delinquencies" (90 days or more). 4. A high "utilization rate" (your current credit balances use up most of your available credit). 5. A large number of recent inquiries (indicating that perhaps you are aggressively seeking credit). Naturally, your credit report can have a dramatic impact on your financial stability. Never assume, however, that your credit report is "too bad" or that you don't have enough of a down payment to own your home. Only an informed lender should make that assessment. These days, there are many options available to home buyers, even those with credit problems. Even if you don't qualify right now, your loan consultant can tell you how to get back on track and give you an idea how long that will take. After all, if you're renting your home, you're probably already paying a mortgage - just not your own!