Credit Reports & Credit Scores
Consumer Reporting Agencies
A Consumer Reporting Agency (CRA) prepares credit reports for lenders based upon data they receive from various sources (creditors, the court system, various public records and debt collection agencies) to determine the credit history of a potential borrower. There are three key consumer reporting agencies - Equifax, Trans Union and Experian. These agencies are completely independent of one another and reporting sources are not obligated to send their data to each agency. You need to obtain a report from each agency to fully understand your credit history and to access all your credit scores. (Scores may differ between agencies since sources may not report their data to all three).
Click on "ORDER Free Credit Reports" in the lefthand sidebar to get a copy of your credit reports. You are allowed a free copy of all three credit reports, once per year. There will be a fee if you choose to access your credit scores along with your free reports.
Credit Reports
All credit reports will display the same basic information:
Public Records and Collection Accounts
· Liens and judgments
· Bankruptcies
· Foreclosures
· Wage attachments
· Accounts in collection
Credit History and Current Obligations
· Dates accounts were opened
· Types of accounts (revolving, installment loan, mortgage)
· Account balances and credit limits
· Payment history for each account, including late payments
· Unpaid child support and overdrawn checking accounts
Credit Inquiries
· Inquiries when seeking new credit; too many in a short time are viewed negatively
· Inquiries for promotional mailings, by current creditors and by yourself for informational purposes are not viewed negatively
Credit Scores
Your credit score is a number that's generated by a statistical program that assigns points to all portions of your credit report. Scores range from 300-850 with 640-680 being "average" and 740 or more considered "excellent." Generally, information falls off the report after seven years, if there are no late payments within that period. However, bankruptcies can stay as long as ten years.
Credit scores are also considered for determining the level of approval you’ll receive on a home loan. As stated above, you may have (and most likely will have) a different score at each of the three credit reporting agencies. The score that will be used in helping to determine your level of approval will be the middle score of the three. (If you and someone else are applying together, the middle score for each person will be identified and then the lower of the two scores will be used). * Most 30 year fixed rate loans at low rates require a minimum score of 640.
Improving Your Credit Score
There are always ways in which to improve your credit score. The following tips will help you begin the process:
- Repair erroneous information
- Limit credit inquiries
- Pay off any unpaid balances to eliminate negative marks
- Pay all bills on time
- Limit new debt and focus on paying off the old
You have the right under federal law to challenge items on your credit report. The credit reporting agencies have 30 days after they’ve received your dispute to decide whether the item(s) should be removed.
It’s a good idea to know the status of your credit before you are ready to purchase a home. It’s also good to give yourself at least six months to repair any errors or negative marks that you might find. You can contact an experienced loan officer at CUHLC, who can help you through the pre-approval process which will give you a better idea of your credit situation as it relates to a mortgage, before you are ready to buy.
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