Your ability to get a home mortgage—and the interest rate you will have to pay for it—is determined by a number of factors, including your credit score. A higher credit score means you are a safer risk for lenders, and therefore your interest rate will be lower.
One of the first steps for preparing to buy Columbus condos or homes is checking your credit score. There are three credit bureaus that keep track of ratings: Equifax (www.equifax.com), TransUnion (www.transunion.com) and Experian (www.experian.com). Each of these agencies will provide you with an annual credit report for free. You will have to pay a small fee, though, to see your credit score.
Your credit report is a history of all credit that has been given to you over the past seven years. It will also indicate what your highest balance was with each creditor and what your current balance is as of the date of the report. It will indicate how many of your payments were late and how many were on time. For late payments, it will show how many days they were late.
All of this information will be used by a potential lender to determine whether or not to give you a mortgage and if so, at what interest rate. If you find any errors in your report, contact the creditors and have them corrected. When you go to speak with a loan officer, make sure to bring any documentation that verify the errors you found.
Credit problems can only be reported for seven years, after which they must be dropped from your report. The one exception is bankruptcy, which appears for ten years. This is why it’s important to settle any outstanding problems now.
Bear in mind that lenders are more interested in what your most recent credit has been rather than six or seven years ago. They at least want to see that the past year has been without collections or late payments. So if you do have credit problems, consider fixing them and then waiting a year or two to apply for a mortgage loan.
In the case of bankruptcy and foreclosure, in the current credit environment you will most likely qualify for a loan again two years after a bankruptcy discharge or three years after a foreclose, assuming your credit record since that time has been clean.
Lenders will use your credit report to asses whether or not to give you a mortgage. Each credit bureau calculates their own score, which ranges from 350-900. Your score is a compilation of your three credit reports and then an evaluation of your credit worthiness and the lender’s risk for loaning to you. Make sure that the score you are looking at is from one of the three credit bureaus, not from an independent company.
Lenders will usually take your credit scores, throw out the lowest and highest ones, and then base their decision on the middle one.
The important point is this: don’t worry. Go to a loan officer. Let him or her do a pre-approval. He’ll tell you your credit score and what you need to do to qualify for a loan.
Call Susanne at 614-975-9650 if you have any questions about your credit score and what it may mean for getting a mortgage loan!