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How to Get and Keep
Good Credit!
What is a credit report?
A credit report shows what you owe and how you have paid back what you owed over the years. This information is collected by credit bureaus from public records and from companies to which you owe money (such as a bank that has issued you a credit card). When you apply, Hometown Mortgage will pull your credit report from one or more of the top three credit bureaus. We will then run your loan through our automated underwriting and your credit report will be compared to your loan application. If your credit does not match what's on your application, you may be asked to explain why.
How can I request my credit report? You can order a copy of your credit report for a small cost by contacting one or all three of the following bureaus:
Equifax Consumer Direct http://www.equifax.com P.O. Box 674406 Houston, TX 77267 1-800-392-7816
Experian http://www.experian.com 701 Experian Parkway Allen, TX 75013 1-888-397-3742
TransUnion Corporation http://www.transunion.com P.O. Box 34012 Fullerton, CA 92834 1-800-916-8800
When you order your credit report, you may be asked to provide the following information:
Note: You should only check your credit report once in a while. Each request is noted as a credit inquiry. The more credit inquiries on your credit can result in a lower credit score. Several credit requests in a short time could be a sign to a lender that your credit use is increasing, which could affect you home loan request.
If I am buying a home with another person, will his/her credit affect the lender's decision? The credit report of every person applying for a home loan will need to be reviewed before the lender can reach a final loan decision.
How can I manage my credit?
1. Establish Credit. Although some people prefer to manage their bills by paying cash or by money order, it is very important to establish a good track record of credit payments. This payment record will help a lender see that you regularly pay your bills on time. You can establish a good credit history by getting a credit card, a car loan, or other types of loans and by paying these bills on time.
2. Establish credit that makes sense. Hometown Mortgage can help you understand which sources of credit may help you build a good credit history.
3. Pay on time. Late payments to companies you owe can lower your credit rating. Always try to make payments on time. Information abut late payments can stay on your credit report for as long as seven years, even if you eventually make the payment. Remember: closing an account will not remove it from your credit report.
4. Manage the amount of debt you owe. When you apply for a home loan with Hometown Mortgage, our lenders will compare your monthly loan or credit card payments to your gross (before taxes) monthly income. For example, if your monthly debt payments total $500 and your gross income is $2500, then 20% of your income goes to pay off debt. ($500/$2500 = .20 or 20%)
5. Limit the number of credit cards. While it is important to have some forms of credit as we discussed earlier, holding or applying for too many credit cards or loans may hurt your credit rating. The key is to limit the number of credit cards and loans relative to your gross monthly income.
6. Review your credit report. If you already have credit, you may want to review you credit report. Make sure that ALL the information (including the spelling of your name, phone numbers, address(es), birth date, age, social security number, marital status and job history) is correct and up-to-date. Most of your credit report will show how you have managed your debts (such as credit card balances, car loans or any other loans) over time and how promptly you have paid your bills.
7. Avoid bankruptcies and foreclosures. If you have filed for bankruptcy, had a home foreclosed, or had a tax lien filed against you, qualifying for a loan may be limited. A bankruptcy or foreclosure can seriously impact your ability to borrow money for a long time, so those choices should be last resorts for you.
If I find errors in my credit report, how can I correct them? If you find mistakes on your credit report, alert the credit bureau, which will investigate your claim. If the credit bureau finds that you are right, the error will need to be removed from your credit within a set time period. What can I do to protect my credit history? If your credit report includes loans you did not apply for, address changes you did not submit or other information you do not recognize, you could be a victim of fraud or identity theft. If you suspect fraud or identity theft, notify the credit agencies at once. The credit agencies will help you create a list of who to contact, as well as add a fraud alert statement on your credit report. This statement will alert creditors to your situation and ask them to verify your identification before approving credit to someone who may claim to be you. What is credit scoring? Your credit score, or rating, is based on what's in your credit report, including your credit history, what you owe, whether you have late payments, types of credit, and the number of recent credit inquiries. Factors such as race, age, religion, national origin, marital status, gender, income, and where you live are not factors in your credit score. Generally, the better your credit history, the better your credit score. |
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Hometown Mortgage - 1710 Westminster - Denton, TX 76205 Phone: 940-243-5000 - Fax: 940-387-5043
© Copyright 2001, Hometown Mortgage. All Rights Reserved. TX Mortgage Brokers License# 15411
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good credit history is very important to getting approved for your home
loan. Here you will find out how your credit affects your ability to
borrow money and what you can do to keep good credit throughout your life.
