If you are thinking of buying a home, it’s essential to get pre-qualified for a mortgage before going house hunting. This will save you a lot of time and increase your credibility with a seller. In today’s market, it’s a must have.
Before getting pre-qualified it’s also a good idea to find out where you’re starting from by checking your credit report. This way you can correct any errors or update negative information and be well-prepared for your home buying journey.
But, how do your check your credit report? To be clear checking your credit score is easy. Getting, reviewing, and understanding your credit report takes a little more effort. Let’s take a closer look.
What is a Credit Report?
Your credit report showcases your financial status. It is basically just a detailed record of your credit history and is used to determine your credit score – although it does not include your credit score – as well as other financial decisions by lenders and other parties.
According to usa.gov, “Credit reports list your bill payment history, loans, current debt, and other financial information. They show where you work and live and whether you’ve been sued, arrested, or filed for bankruptcy.”
Getting Your Credit Report
You can order one free copy of your credit report each year from the three main reporting bureaus: Equifax, Experian and TransUnion. The quickest and easiest way to get them is by using the government-mandated AnnualCreditReport.com. By ordering directly through this site you can get all three reports at once for free. You can also request them by phone or mail.
First, make sure you’re on the right site: AnnualCreditReport.com. Some other sites have similar-sounding names. The one you want looks like this:
You’ll need your name, Social Security number, address and birthdate. This, along with other personal data, will be matched against files for identification. For each report request, you’ll be asked a few questions about your finances that presumably only you can answer — for instance, the approximate amount of your mortgage payment or who holds your auto loan and when you took it out.
Sometimes it’s difficult answering security questions about accounts that are several years old. If you can’t recall those details, you can request your reports by mail or phone. This process doesn’t require security questions.
Reading Your Credit Report
While there may be minor differences in how each of your credit reports is organized, all three bureaus should provide accurate information in these five sections:
- Personal Information
- Employer History
- Credit History
- Public Records
- Credit Inquiries
As you read your credit reports, look for:
- Accounts that aren’t yours or you didn’t authorize.
- Incorrect or negative information.
- Negative information that’s too old to be included. Most negative information, other than one type of bankruptcy, should be excluded after seven years.
These errors have the potential to hurt your credit score. You might see other types of errors, such as out-of-date employment information, she says, but those aren’t factored into your score. If you find errors, dispute them. The credit bureaus will investigate and must remove information that they can’t verify.
Monitoring your scores and reports annually can also tip you off to problems such as an overlooked payment or identity theft. It also allows you to track progress on building your credit. If you notice an inquiry you don’t recognize, it could indicate identity theft.
When you understand how to read a credit report, you gain a better understanding of your overall finances. It may seem intimidating to read a credit report, but breaking down the information in your credit reports is easier than you think.
The Bottom Line
Credit reports are an important snapshot of your financial health. Credit can make or break your chances at a mortgage and influences what kind of credit cards, insurances and interest rates you qualify for. Knowing how to read your credit report helps you understand how to improve your credit and maintain a healthy credit score.
The Hadley Team can answer questions to help you understand your credit report. We offer a full range of mortgage options and can help you decide which financing option is best for you. And, we can speed up your loan process by getting you pre-approved. So, let’s connect!