If you're ready to purchase a home or refinance, you'll want to assess your current credit standing before securing home financing. To do this, you will need to obtain your FICO credit scores which are a key factor in determining your eligibility when applying for a mortgage.
Your FICO scores are based on a scoring system developed by Fair, Isaac & Company, and are provided to lenders by the three national credit bureaus, Equifax, Experian and Transunion. Here are a few suggestions you can implement to enhance your credit score:
1. First, order your credit reports from all three bureaus. Since each bureau is independent, information that appears on one credit file may not appear on the others. You can request reports from each of the 3 credit bureaus once a year online for free at annualcreditreport.com.
Myfico.com provides more immediate access to your Transunion and Equifax credit profiles. Myfico.com also offers a monthly monitoring service for nominal charge which is a great investment especially if you're in the process of securing financing.
2. Once you receive your reports, review each item to make sure everything is correct including your name, addresses, birth date, social security number, payment history and balances. Also check for duplicate information.
3. Dispute inaccurate and outdated information. Negative information such as defaulted student loans, collections and charge offs should be removed within seven years from the date of last activity (DLA). To dispute by phone, call the 800 numbers provided on each credit report. You can also do this online. The websites are listed on each report. If you disagree with the outcome of your dispute, contact the creditors directly to resolve the issue.
4. Pay down charge accounts in good standing, but leave the account open. This improves your debt to
balance ratio. Three to five open, active accounts are generally sufficient.
5. Refrain from opening additional credit accounts, especially if you are planning to purchase a home or
Once you clear up your credit, continue to make timely payments to your creditors. Keep your credit balances to at least 50% of their limit (of course the lower the better). Maintaining a good credit score will ensure you qualify for the best available loan programs at the best rates.
Home Financing and Credit Enhancement Coach, Gina Jackson is a financing industry consultant who knows what lenders look when approving people for financing. The Founder of youdeservegoodcredit.com, Gina has worked with hundreds of people to help them increase their credit scores and obtain home financing.