Thinking of becoming a home owner? Do you know your credit score?
One of the determining factors of the types of mortgages and interest rates available is your three digit credit score. Can you even get a mortgage? Find out before you begin getting your hopes up about home ownership.
Typically you should begin your home buying odyssey by being Pre-Approved by a Lender. As part of the Pre-Approval process you will provide your personal information, including Social Security Number(s). Your lender will then be able to pull your credit report, submit your information to "Automated Underwriting" and receive an approval in minutes. One of the major factors of this Pre-Approval is your credit score.
There are three credit reporting bureaus and each one has their own proprietary formulas for determining your credit score. That is why you have three credit scores. At the time of application a short-sited Loan Officer may only pull one credit score because they are paying for the credit report. The LO selects a bureau and gets a score, which could be the lowest of the three. Decisions can be made based upon the lowest score, whereas a good LO will simply pull all bureaus. The Lender needs all three scores in order to process the Pre-Approval and typically uses the mid-score in that process. Now you can talk about a mortgage you actually qualify for. Don't expect that the LO will give you a copy of your credit report, until after the loan closes. They are not an authorized issuer of credit reports and could loose their companies ability to pull credit reports if they don't follow the rules
The credit scale runs from 300 to 850. The vast majority of people will have scores between 600 and 800. A score of 720 or higher will get you the most favorable interest rates on a mortgage.
Do you have credit issues? Bad Credit? Room for improvement?
If you have credit issues your LO will be able to review your credit report and recommend actions which could improve your credit score if needed. BUT, some actions, like paying off an old judgment (the right thing to do under most circumstances) could impact you score detrimentally! The lender may not require it and the LO just cost you money! Take care when making changes at the time of application. Some pre-planning with a competent LO can help get your score up in a short period of time. You may not like it, but bad habits or principals be damned. If they say it is owed and you can't get it changed- you owe it and need to resolve it! The sooner you pay the outstanding obligation, the sooner your credit scores will begin to rise.
Know your credit score. You are entitled to a free credit report once a year. You might try http://www.freecreditreport.com/
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