I got a call yesterday from a prospective buyer, a first time home buyer who had just found his dream house. It was a referral and this was the first time I had talked with him.

We went over all the normal mortgage pre-qualification questions, and things were looking good. He was buying in the right price range, his income was more than enough to support the loan and he had money in the bank for a down payment and closing costs. Then I asked the credit question.

"Overall, how would you rate your credit?

"It should be pretty good, by now," he answered hopefully.

Uh oh! Problems ahead. There are lots of ways to answer this question. Some people know their Fico scores and tell me right away. Others will say that their credit is excellent, or maybe they've had a few problems in the past, and then go into the specifics. Some answers are more vague - "It's ok, I guess", and, "about average", are two of my favorites.

Sometimes the tone of voice is confident, other times it is almost tentative. Either way my antenna goes up and the red flags are flying- we may have a problem here. This means more probing into what happened and why it happened.

To make a long story short, the credit scores were too low to do anything now. His overall credit profile really wasn't that bad, but there were a few late payments and some collections out there, including one that had just been filed as of this month.  I gave him some advice on specific things he could do to clean up his credit, wished him luck, and put him on a schedule for follow up. He will be able to buy down the road, but he was not going to be able to buy this dream house now.

The sad part of this story is that it could have easily been avoided.  If we had had this conversation a few months back when he first started looking for a home he could have been in a position to buy. Most people, whether they have run their credit or not, have a pretty good idea of what their credit looks like. If there are problems, they usually know about them.

I think it may be human nature for people to ignore their problems and hope they just disappear. But putting your head in the sand is not a good strategy for success. If you are looking to buy a home in the future, do yourself a favor. Talk with an experienced loan officer now, have them review your credit, and make sure you are as ready as you can be. Do the planning now and you will be thankful later.    

Pete Thompson is an Illinois based mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage.