A guide to understanding your credit.
Understanding Your Credit
For many of us, debt is a way of life. Installment payments and credit cards can be useful financial tools. But if not controlled, credit can eventually control you. Your credit does not have to be spotless to qualify for a mortgage, but your credit history must clearly show that you are willing to pay your debts.
Your Credit Report
When you apply for a mortgage, the lender will look at your credit report. They want to see if you’ve been responsible about paying your debts. Your credit report can be obtained for free once per year from the 3 major credit bureaus. These agencies gather statistics on individual payment records on loans, credit cards and other debts. It’s a good idea to review your own credit report before you apply for a loan.
When you get your credit report, look carefully for any past due amounts or “charge-offs”, which means a bill was never paid. Remember – poor credit can prevent you from qualifying for a mortgage. Or it may cause you to pay a higher interest rate. Make sure the information reported about you is correct. If you see any discrepancies, you can contact the credit bureaus to contest the reports.