Understanding Your Credit Report

by Kelly Richardson
Loan Page Columnist

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With all of the emphasis placed on maintaining a good credit report, have you ever thought the kind of information is reflected in that report? Your new home loan hangs in the balance. Here is what your credit report means to your financial situation.

Homeowners that are seeking a new mortgage loan find out quickly that their credit score plays an integral role in determining the terms of the loan. If you know how your credit score is determined, you will be in a better position to improve your financial situation and get a better loan.

Credit History Factors Affecting Mortgage Loans

Your credit report takes into consideration a variety of factors throughout your financial history. Some of these factors are in your control, while others are not. Here is a rundown of some of the important parts of your credit report.
  • » Payment History: Your credit report includes your entire payment history for debts with credit lenders, as well as regular bills
  • » Amounts You Owe: Your new home loan will be affected by your current debt level
  • » Length of Credit History: The length of your established credit also plays an important role in determining your new home loan

These factors are assigned various percentages of the entire credit report contents. The best thing about your credit report is that once you know its contents, you can take immediate steps to improve your rating before you apply for a mortgage.

Improving Your Credit Score

If you're credit score isn't what you'd like it to be, there are things you can do. Here's how to get started:
  • » Acquire a Report: The first step to improving your credit score is to obtain a copy of your report from each credit reporting agency--Federal law entitles you to one free credit report per year from each of the three major credit reporting agencies
  • » Pay Off Debt: Paying off your current debt will improve your chances of getting a favorable mortgage loan
  • » Communicate with Bureaus: Dispute any discrepancies in your credit report with the bureaus that keep track of your information

Before obtaining a new home loan, get a copy of your credit report and study it very carefully. This is the first step to securing a favorable new home loan.

About the Author
Kelly Richardson covers the local education and technology scenes in major cities across the country. His articles appear in educational journals, periodicals, and e-zines.

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