Before you are ready to shop- Do your own homework
Step 1: Obtain your own 3 current full credit files.
6 months before you are ready to find your new home, there are a few steps you should take in preparation for that effort.
Ideally this process should begin about 6 months prior, but if you need to find a new home immediately, take the following steps now as well. The only difference will be you have less time to find and fix any surprises that appear on your reports.
3 credit files? What do you mean?:
Your credit history from student loans, credit cards, personal and secured lines of credit, car loans, home equity, and 1st mortgage loans are all recorded and monitored by 3 companies (credit bureaus).
These companies are Experian, Equifax, and TransUnion. The 3 companies track how promptly you pay your bills, how late they become, balances on accounts, collections, court judgments against you, and may even get delinquency reports from any number of businesses including utilities, health clubs, and stores you do business with.
Why should I get my own credit reports?
When you apply for credit, what usually happens is, the creditor will pull 1-3 of your reports and determine your eligibility based on the contents. Each time an “active request” like this is pulled a negative number is added to your FICO score. (see What is a FICO score?)
I. When you personally get your own reports, it is considered to be a “passive request” and is therefore not flagged with any negative impact on your FICO score. FICO considers such inquiry as a proactive measure on your part to efficiently manage your own credit.
II. If you find any errors on your 3 credit files it may take you as much as 6 months just to get the errors removed or rectified. Persistence and polite assertion with the 3 bureaus will get the results you need.
III. With your own reports in hand you can shop and compare lenders efficiently without having them each pulling your credit scores and thus multiple hits against your score. Saving the one lender you select in the end to pull your report for final approval.
How do I get my Credit Reports?
Several websites allow you to obtain your credit reports and scores.
TransUnion offers the best deal, all 3 reports and scores for $29.95
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Suze Orman www.suzeorman.com the famous TV personal finance guru has even developed a kit she sells for $49.95. She also will give you advice on how to fix your reports and scores.
You may also go directly to www.myfico.com and purchase all three of your scores for $38.85 without Suze Orman’s other tools.
FICO is an acronym for Fair Isaac Corporation which is the entity that created the universal scoring criteria for assessing credit worthiness of individuals in the United States. This company owns the patents and continues to maintain the criteria by establishing the rules which are used to take data from your credit report and assign a numerical value for each of the 3 reports issued by the credit bureaus.
FICO scores range from 500-850. The higher your score, the better interest rates and greater variety of loan products you will qualify for with any given lender.
When qualifying for most loans, the lenders will use the “Mid-Score” of the 3 which have been calculated from your credit report as the basis for issuing your loan, but they will also consider other factors shown in the 2 other reports as well.
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