| Unless you fall into the very rich category, one of the | | | | entries on your credit report can (and SHOULD) be |
| most expensive loans you will ever get will be your | | | | disputed by you, and the credit bureau who is reporting |
| mortgage loan. With even modest homes in nicer | | | | that data then has 30 days to either verify it, or if it |
| neighborhoods costing well over $150,000 these days | | | | cannot be verified, it must be removed. You are the |
| in most parts of the country, even a quarter percent | | | | only one who can dispute data on your credit report, |
| difference in the interest rate on your mortgage loan | | | | so get a copy of your credit report and start looking |
| can account for hundreds of dollars per year, just in | | | | for errors. |
| excess interest charges. | | | | Here's another reason why this step is so critically |
| You need to fully understand that a mortgage loan is | | | | important: studies have shown that the majority of |
| significantly different from a personal loan or a | | | | consumer credit reports have errors on them. This |
| signature loan. Based on the amount of money you will | | | | only makes sense, because creditors and lenders |
| be borrowing, which translates into higher risk for the | | | | typically only report to one of the three credit bureaus, |
| lender, it is clearly in your best interests to start paying | | | | and since they do not share data between them, it is a |
| attention to your credit score, how it is calculated, and | | | | fact that not one of them has an entirely accurate |
| what you can do to raise your credit score. | | | | picture of your credit history. That loan that you paid |
| In the eyes of the mortgage lender, the higher your | | | | off three years ago might be showing as paid off with |
| credit score is, the less risk they feel like they will be | | | | one agency, but might also be showing as still |
| assuming, which translates into a better mortgage loan | | | | outstanding, past due, or even charged off by another |
| program for you, better terms, lower down payment | | | | agency. These errors all tie together to lower your |
| on the loan, better interest rate, lower closing costs, | | | | overall credit score, so it is obviously worth your time |
| and many other factors that will either save you | | | | and effort to get them disputed and corrected. |
| money or cost you more money, depending on how | | | | Another thing you can do is to make each and every |
| diligently you work on achieving your raised credit | | | | one of your credit card and loan payments on time |
| score. | | | | with at least the minimum amount due. Unfortunately, |
| With a mortgage loan, the lender has a bit of safety | | | | this is really a "history" thing, so if you are going to |
| factor built in, because your house is really your | | | | apply for a mortgage two months from now and have |
| collateral on the loan. If you default on the mortgage | | | | not been making timely payments before now, your |
| loan, the lender can sell your house and you get | | | | mortgage loan is going to suffer. Making timely |
| nothing. But unless extreme circumstances warrant it, | | | | payments accounts for about 30-35% of your total |
| lenders don't like to do that. They make their money | | | | score when your credit score is calculated. |
| with loans, not by selling houses where the previous | | | | If you have credit cards with outstanding balances on |
| owner defaulted. | | | | them, that is ok, as long as none of them are past due. |
| In the mortgage loan evaluation process, your credit | | | | Your best bet is to make payments on them such that |
| reports from all three major credit bureaus will be | | | | you NEVER exceed your credit limit, and that your |
| analyzed thoroughly. Any skeletons in your credit | | | | outstanding balance is less than about one third of your |
| closet will be exposed and you will be asked about | | | | credit limit. This tells your mortgage lender that you are |
| them, even if it was from several years ago. Know | | | | not abusing your credit privileges by "living on the edge" |
| this up front because chances are better than | | | | of your credit limits. |
| excellent that this WILL happen …. IF those entries | | | | Bottom line: to get the best mortgage loan possible, |
| are still on your credit report. | | | | take the time beforehand to review your credit report |
| This is where knowing what you can do to raise your | | | | so that it looks as good as possible to the lender. The |
| credit score comes into play, because you have rights | | | | time and effort you put into this will pay itself back in |
| under the law. One of those rights is that erroneous | | | | spades. |