By Relocation.com Staff
By now you should have a good idea of how much you have to spend, right? Well, not completely.
When deciding how much a lender will loan you, mortgage officers will also take into account your credit rating. The lenders want to ensure they will get their money back, and your credit payment history is a good indication of the likelihood of them getting paid back, and paid back in a timely fashion. Good credit history and ratings are also critical to getting a loan at the best terms.
Check your credit rating before approaching a lender for a home loan. If there are any problems, resolve them before applying for a loan. If there are any unresolved issues, be ready to respond to any questions the lender may have.
Ask yourself the following questions to determine if a lender would deem you to be a risky creditor:
- On your current mortgage - Have you let payments go past due by date without paying?
- Revolving Credit - You should have no payments more than 60 days past due date and very few more than 30 days past due date.
- Installment Credit - You should have no payments more than 60 days past due date and very few more than 30 days past due date.
Next, order a credit report for yourself -- the lender sees the same report you see, so there should be no surprises. Companies you do business with send on credit information about you weekly, monthly or quarterly to credit reporting agencies to update their systems.
There are basically three major national credit companies given below that you can obtain your credit report from. You may be able to do this by phone. If you do so in writing, be sure to include your name, address, social security number and you may also need to include a copy of your driver's license.
1. Experian
P.O Box 2104
Allen, Texas75013-3742
1-888-397-3742
http://www.experian.com/
2. Trans Union
P.O Box 390
Springfield, PA 19064-390
1-800-888-4213
http://www.transunion.com/
3. Equifax
P.O Box 105873
Atlanta, GA 30348
1-800-685-1111
http://www.equifax.com/
What is your FICO score and why is it so important?
The number of most interest to you is the FICO number, which is basically your credit rating. The scale for rating goes from 300 to 800, with 800 the best. Scores higher than 650-660 are considered good but anything below this will need some explanation. If your score is over 700, your chances of getting a mortgage are much better.
If your score is under 600 you will most likely have difficulty in securing financing and, if you do, you will probably be penalized with a higher interest rate. There can be one or many reasons why your rating is so low. Your revolving credit or mortgage payment may be consistently late, or you may have defaulted on a car loan or other loan in the past. Or you may not have paid off your medical bills on time. Surprisingly enough, if you have obtained very little credit in you life, you may also have a low rating as there is very little credit history for you to be judged on, so the lender might assume the worst case.
Correcting Mistakes on Your Report.
If your score has been unfairly calculated based on incorrect information or any issue that has already been resolved, bring this to the credit agencies' attention. You will need to obtain a letter from the originator, such as a credit card company, stating the issue has been resolved.
In case there was an error on the company's part, you will need to get the store to write a letter of explanation that you can give to the credit agencies. If the error is with the credit agencies such as an incorrect name, you must clear it with them. After this, your FICO score will need to be recalculated and you can request a credit report to check that the issue has been resolved.