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Congratulations! You have decided to purchase a home, or are thinking about buying one. You'll be joining the ranks of hundreds of families who realize that home ownership offers a number of benefits including building equity, saving for the future, and creating an environment for your family. When you own your own home, your hard-earned dollars contribute to your mortgage. The equity you earn is yours. Over time, your home will increase in value.
In the following reports, you'll find the information you need to make a wise buying decision. We'll take you through the planning process step-by-step , to help you determine which home is right for you. You'll find a host of informative articles on mortgages, viewing homes, the offer, closing details and moving.
Please contact me if you have any questions about buying a home in Colorado Springs or elsewhere in Colorado.
What is a Credit Score?
The credit score is a new tool created to help evaluate a specific credit profile more objectively. Instead of focusing on individual accounts, the credit score helps the lender evaluate the entire credit report in a non biased manner when making a loan decision.
If incorrect information appears on your credit report, it will affect your credit score. Once corrected, it can take anywhere from 30-90 days for the accurate score to be corrected on your credit report.
Can credit reports contain things you might overlook, such as a late payment for a magazine subscription?
Yes! Your whole financial life is reflected in your credit report.
Is it possible for mistakes to appear on my credit report?
Yes! There are many mistakes that happen through credit reporting agencies. There are three agencies that receive a minimum of two billion pieces of information per month. They have thousands of people doing data entry, entering files that are 30 days late, judgments, etc...so they are receiving millions of pieces of data per hour. Due to the tremendous volume of information being processed, errors are inevitable. It is crucial that you review your credit report carefully and correct any inaccuracies that might damage your credit.
It is always a good idea to obtain a copy of your credit report before applying for a home loan. By doing this, you can correct any errors on your credit profile in advance; establish credit if necessary or start repairing your credit if you have had problems in the past. Lenders look very carefully at your credit as an indicator of your “character” of your willingness to repay your loan. Having poor credit, little or no established credit or unresolved disputes with creditors can affect your purchasing power, what type of interest rate you will pay, how much money you will have to put as a down payment, and your overall ability to get a loan. To avoid unpleasant surprises down the road, you can request a copy of your credit report. Make sure and request a report from all three of the credit agencies – some creditors only report to one or two, so this way you will be able to see everything that is out there under your name and social security number. When you get a mortgage, lenders will pull from all three credit agencies to determine your qualifications.
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What Makes Up Your FICO Score?
#1 Payment History (35%)
- Bankruptcies, judgments, suits, liens, collections and lates
- Older items count less in score
- How late the accounts are, how much was owed, how recently they occurred and how many lates there are
#2 Amounts Owed (30%)
-Having very small balances without missing a payment is better than no balances at all
- Closing unused credit accounts with zero balances will not raise the score
- A large number of accounts (even if paid on time) can indicate higher risk and produce a lower score
- Maxing out credit accounts (even if paid on time) can lower the score
#3 Length of Credit History (15%)
- A lot of new accounts opened will tend to lower the score
- Having few accounts with recent activity is better than many accounts without any recent activity
#4 New Credit (10%)
- Many new accounts with little activity tends to lower your score
- A large number of inquiries for credit card applications reduces the score
(Mortgage and auto inquiries show but don’t effect the score!!)
- Good pay history following recent credit problems will increase the score
#5 Types of Credit in Use (10%)
- A healthy mix of different types of accounts (credit cards, installment loans, retail accounts etc…) will improve the score
- Having an excessive number of any one type of the above accounts will lower the score.
Common Credit Record Errors
Common credit record errors include the following:
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Your credit file includes credit information for someone with a similar name or a name identical to yours.
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The name of a former spouse appears on your records.
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Your name is misspelled, your address is incorrect, or your social security number is incorrect.
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Duplication of accounts.
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Account information is inaccurate or incomplete.
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Outdated information is included.
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Account information does not relate to you.
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Unauthorized inquiries are listed.
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Failure to show released tax liens.
Should these problems be discovered on your credit report, the process for correcting these errors with each bureau is the same under the terms of the Federal Credit Reporting Act.
HOT TIP
One way to help reduce the potential for error in your credit file is to use exactly the same name every time you fill out a credit application. For example, if you have a middle name, use it consistently (whether as a full name or just an initial) or not at all; and always specify if you are a junior, senior etc.
How to dispute information on your credit report
The first step you should take is to order your free credit reports directly through the credit agencies:
Trans Union Consumer Relat. Equifax Consumer Relat. Experian Consumer Relations
PO Box 2000 PO Box 105496 PO Box 2002
Chester
, PA19022 Atlanta, GA30348 Allen, TX75013
800-888-4213 888-532-0179 888-397-3742
www.transunion.com
www.equifax.com
www.experian.com
All 888 or 800 numbers are free reports and on all of the websites you could be charged a fee for your reports.
Once you receive your credit reports check for the following:
Incorrect Entries
If there are mistakes on your credit report (i.e. accounts that are not yours or on-time payments that are showing as late, etc.), you can have them corrected by writing to each credit bureau and requesting that the information be deleted. They will contact the creditor who must respond within 30 days. If the creditor does not respond, the item will be removed and a new credit report will be issued to you. If there is a simple dispute, you can add a 100-word statement to your file explaining your side of the story.
Out dated Negative Credit
If there are unfavorable credit items older than 7 years showing on your report, follow the procedure outlined above. Chapter 7 bankruptcies can be removed after 10 years and judgments, state tax liens, federal tax liens, chapter 13 and 11 bankruptcies, collections and late pays can be removed after 7 years from last activity date or from paid date.
Current Negative Credit
If you have current credit problems, the time to resolve them is before you buy. Re-establishing good credit after a bankruptcy or other credit problems is very important.
Having an established credit history is also important, as lenders want to see a track record of debts owed that have been repaid. Most loans are driven by what your credit scores are.
If you do not recognize information on your credit report, or believe an item may be inaccurate, you may request an investigation and correct any discrepancies with the actual credit agencies. Only inaccurate information may be removed from your credit report; negative information that is accurate will stay on your report as long as governing laws allow
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