Check your Credit History before deciding to Purchase a Home

As a home buyer, there are many rules that need to be followed before even placing a bid. Numerous papers need to be in order including a prequalification letter from a lender, the highest amount of price the buyer is willing to spend, the area where the buyer would like to reside, and your credit history. Many people will apply for a mortgage and either get denied or get a very low qualification amount. As a result, they are often puzzled.

Before deciding to purchase a home, check your credit history first to make sure there are no negative marks or a low score. Making the decision to buy a home is stressful enough. Why not be a proactive consumer before finding out you do not qualify for any mortgage?

Most lenders of mortgages and bank loans will not qualify a potential buyer if their credit score is too low. Before deciding to begin the process of purchasing a home, consumers should request their credit score and credit reports from all three credit reporting agencies because each agency reports differently. TransUnion, Experian, and Equifax are the three top agencies where mortgage and bank lenders inquiry to when making a decision about the qualifications for a mortgage. There are a few ways to obtain your own credit reports either by phoning each agency separately and requesting a report be sent to your home, sending a letter through snail mail, or the internet. Many websites now offer all three reports for one price. Depending on the situation, sometimes consumers can get their reports for free.

The credit score is called FICO and this determines your financial future. The score ranges from 300 – 800 with 300 being the lowest and 800 being the highest. From these reports, everything you have ever done is listed from credit cards, student loans, and inquiries that companies have made on you. Each monthly payment is documented if it was paid on time, late, and how late. These reports give all the information a financial lender needs to determine if you are a risky candidate to give a loan to or not. If there are any negative marks on your credit reports, the sooner you get them off, the better. Usually negative marks stay on for seven years before they can be taken off.

Here is an example: Let’s say Debbie decided she wants to buy a home in the next year and she never looked at her credit reports. She knew she had some bad experiences a few years ago with a credit card where she was making late payments or no payments at all for some months. She figured since she paid off the credit card and has made an effort to not be in that situation again, her credit score has to be pretty high. Debbie requested her credit reports and waited to receive them in the mail.

When she began reviewing them she found that the credit card company from six years ago never reported the fact she paid off the credit card and closed the account. This information has been sitting on her report for six years and it has brought her FICO score down. Immediately Debbie remembered she received a letter from the credit card company six years ago stating she paid off her balance and filed it away. Debbie made copies of this letter, wrote her own letter explaining the situation, and requested the reporting agencies to change this information. Within two months, the reports were fixed and Debbie’s credit score did increase to over a 700. A year later, Debbie found herself shopping around for houses with a prequalification letter.

If Debbie never took the time to review her credit reports, when she began her home search she would have had major disappointments. Checking your own credit is part of living in today’s world. Due to the internet, identity theft has increased by 80% and by checking your credit every few months, makes you an informed consumer and less likely to become a victim. The entire buying real estate process all depends upon that one little number and if it doesn’t fall in the right category, then it becomes difficult to ever own a home.

Categories Buying a Home

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