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Check Your Credit Before Applying for a Mortgage

Most people have a pretty good idea of how their credit looks. At least, they think they do. It is vital that you actually verify your credit situation before applying for a mortgage to avoid ugly surprises.

Your credit score plays a vital role in getting financing for a home purchase. Lenders pay very close attention to the score, often represented as a FICO score. That being said, there is an ugly little secret floating around in the credit industry. Most credit reports have errors on them. In fact, the major credit bureaus have reported that more than half of all credit reports have errors. Congress fines the agencies each and every year for these errors, but there is rarely any improvement.

So, why are credit reports such a mess? There are two reasons. First, we are credit based society. It is the rare person that has no credit whatsoever. For even them, there is a credit report that details information such as where they live, rent payments and so on. There are over 300 million of us in the country. If you assume every person has an average of 20 bits of information on their credit, that equates to over 6 billion pieces of information. Now, how likely do you think it is that errors do not occur based solely on the amount of information involved?

The second problem is the nature of the credit reporting system. Simply put, credit agencies such as Experian do not go out and find out what you are doing in regards to credit. Instead, creditors voluntarily report the information. If the creditor reports the wrong information, the credit agency has no way of knowing it is incorrect. The information, in fact, will just sit on your credit report until you complain about it.

As you can see, you should not guess about your credit profile before applying for a loan. Imagine waiting for escrow to close only to find out you have been rejected for a loan because your credit score is too low. If you are really lucky, you might find out that someone stole your identity?

If you are going to be applying for a mortgage, there are two steps you should take. The first is to order copies of your credit report from the three major reporting agencies. Once you are sure everything is accurate, get pre-approved for a loan from a lender so you know there are no hidden problems.

Dan Lewis is with Great Western Mortgage - providing California mortgage home loans.

This article is free for republishing
Source: http://www.articlealley.com/article_140780_19.html

Keywords: applying for a mortgage, congress, credit profile, credit report, credit reports, credit score, credit situation, creditor, creditors, escrow, fico score, lenders, major credit bureaus, rare person, reporting system, ugly surprises.

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