Understand Your Credit Before You Start Mortgage Shopping
A lender's decision to approve your mortgage hinges on the data contained in your credit report. So if you're planning on applying for a new loan, you need to know your credit before you start shopping for a loan.
What's In Your Credit Report?
Your credit report is a history of your pattern of payment for various types of debt. It shows whether you pay on time, if you have any past due accounts, and the total amounts owed on your personal and joint accounts, In addition to this credit history, your credit report contains information about you, such as past employers, former names or aliases you have used, and information from public records including personal bankruptcies, liens and judgements.
Your Credit Score
A credit score is a quick way to summarize the data in an individual's credit report. The score is a rating ranging from 300 to 850. A higher score indicates a better credit rating. Credit scores vary between credit bureaus, so many lenders use a form of credit report that blends all three.
Originally developed by Fair Isaac Corp. as the "FICO" score, a credit score combines 22 pieces of data collected from the three major credit bureaus (Equifax, Experian and TransUnion). The score is determined by ratings in five categories:
- 35% of the score is based on the payment history
- 15% for the length of credit history
- 10% for new credit accounts
- 10% for on the types of credit used
- 30% the amount of total debt
You can - and should - check your credit report often. There are a number of online sources for credit reports, including:
You may also wish to visit the web sites of the three credit bureaus for more information about your credit:
