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Mortgage Library: Loan Application Process: Credit report
|Your ability to obtain a mortgage depends on your financial habits which are tracked by creditors. Before extending credit, lenders will want to examine the risk of not getting the money back. Credit reporting agencies receive information from credit grantors about how people have paid back bills and other credit obligations and then provide that information to those who extend credit. From this information lenders
can develop an idea of just how you will handle your responsibilities once you have signed the contract for repaying the loan.
There are over 1000 local and regional credit bureaus throughout the United States. Most credit bureaus are either owned or under contract with one of the nation's three major credit reporting agencies:
These national agencies maintain centralized databases containing the credit records of more than 170-million Americans.
Make sure you know what's in your credit report before applying for a mortgage loan. That way, if there are any errors you can take steps to correct them before you make your application. It is estimated that 50% of all credit reports contain errors significant enough for an individual to be denied a loan! So we advise that you take the time to order your credit reports from all three credit reporting agencies and make certain they are accurate.
There are basically two types of credit reports available to consumers, "individual" or "merged" reports. Individual reports are provided by the three major credit reporting agencies: Experian, TransUnion and Equifax. Merged reports offer information from all three of the credit reporting agencies on one easy-to-understand, credit report.
Examine the credit report carefully to see if it is up to date and correct. If you find an error, complete the Research Request Form that is sent along with your Credit Profile, and give details of the information you believe is incorrect. Include any documentation that supports your claim. Send it certified mail. The credit bureau must correct any errors in the report. If there are unsettled disputes over certain accounts, it must also include your side of the argument in the report.
If the credit report is accurate and you have a questionable credit history, you need to start repaying outstanding balances on time in order to re-establish an acceptable record.
If you need help dealing with your debts, you may want to contact the Consumer Credit Counseling Service. CCCS has more than 1,200 offices throughout the country. This nonprofit organization can help you analyze your situation and work with you and your creditors to establish a repayment plan that will satisfy both you and your creditors. Visit also our page Credit Counseling, where you will find other agencies that assist families and individuals with financial problems.
If you know you have a credit problem, it may be to your advantage to talk about it at the time of your loan interview.
If you have not yet established a credit history, begin with a secured credit cards, which are easy to qualify for, apply for credit with a local retailer such as a department store, and remember to pay against your balance as soon as you can.
Frequently asked questions regarding credit reports
Should you order credit reports from all of the bureaus?
Are you entitled to free credit reports?
What is the Fair Credit Reporting Act?
Should I use one of those companies that promise to help correct my credit?
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