Common Credit Headaches and How to Handle Them
For many folks, delving into the weeds of their credit is probably the least favorite step in preparing to buy a home – it’s certainly not an exciting one.
And there’s really no question as to why.
Understanding your credit score and all the activities that can hurt it or improve it can be complicated and confusing. It’s stressful, too, because there’s the possibility that you discover your score isn’t as good as you thought, or you find out there are items on your credit report that don’t belong.
But like it or not, credit plays an enormous role in the process of securing a mortgage loan and buying a home.
Since questions about credit come up a lot, we here at Gulfside Mortgage Services decided to write this article to help with the top five credit questions we get.
- How do I Check My Credit Report?
This is an easy step but unfortunately many do not realize they can do it for free. You should never have to pay to see your credit report.
One of the best resources you can use to check your credit report is annualcreditreport.com. You can check your report weekly for free. Furthermore, they allow you to check all three reports available from Equifax, Experian and TransUnion.
Additionally, some credit card providers will allow you to check on your credit score for free as well. - How do I Dispute Errors on My Cre-dit Report?
It is important to review your credit re-ports carefully, as this is a major way to catch identity theft and erroneous charges, both of which can hurt your credit score and negatively impact your eligibility for a good mortgage.
If you find what you believe to be an error in your credit report, you can dispute it and have it corrected. Both the business that reported the infor-mation and the credit bureau it was reported to must correct wrong infor-mation, and they have to do it for free.
You will need to dispute the error with each credit bureau that has the wrong information separately. Take the following steps to officially dispute an error:1) In writing, explain what you believe is wrong, include the bureau’s dispute form (if they have one), and copies (not originals) of documents that support your claim. Make sure you include your full name and address, as well as a copy of your report with the mistakes circled. Keep record of everything you send.
2) So that you know the credit bureau receives the letter, send it by certified mail and pay for a “return receipt.”
3) You can also submit disputes online or by phone, but be sure to have all of the previously mentioned documentation ready to include in the email or at hand while on the phone.Once received, the credit bureau has 30 days to investigate and must get back to you with their decision. To learn more about submitting disputes and other steps you can take, visit consumer.ftc.gov - Does Shopping for Loans Hurt My Credit Score?
The answer is technically ‘yes,’ but only slightly if you’re doing it right.
There are two key factors to understand about how searching for loans impacts your score.
First, all inquiries occurring within 30 days of scoring have no impact on the score at that time. Once more than 30 days have passed, all inquiries within that time frame only count as a single inquiry.
Second, multiple inquiries for loans of the same type (mortgage loans, for example) will also count as a single inquiry if they occur within the same 45-day period. The assumption here, again, is that you are ultimately seeking one line of credit, so looking at multiple loans only counts once.
But all of that also depends on you making your multiple inquiries within the same 30-45 days. If you make multiple inquiries in one month, put your search on pause, and then make more inquiries in the next month, and spread it out, the inquiries will hit your credit more than once, which may start to add up.So, the best advice is to do your loan shopping in a fairly short time. Make sure you are ready to move forward when you begin searching for specific mortgages, so when you find a good rate, you are jumping on it.
Additionally, note that even when inquiries do hit your credit score, they only have a minimal impact. A single inquiry typically only lowers a FICO score by less than five points, depending on a person’s credit history. Consumers who have a shorter credit history or few accounts may see a greater impact. But among the five categories used to make up a FICO score,journey and discovered that your cre-dit is less than ideal, there are steps you can take to improve it.
- First, pay your bills on time. Payment history, including de-linquent payments, hits your credit score.
- Lower your debt. Try to keep your credit utilization below 30%. Focus on paying down some of those credit cards.
- Don’t close old accounts! Length of credit history matters. While it is tempting to close a credit card account you have fi-nally paid off, DON’T! It can hurt your score. If you don’t want to be tempted to use it, just cut the card up and get its info off any digital payment apps.
- Do limit your new credit inqui-ries. Try to keep new inquiries within a short period so that they only count once on your score.
It may take a little time, but taking one or all of these steps will improve your score and you may even see some immediate improvement.
Have More Questions?
We hope the above guide will help answer some of your more pressing questions regarding credit concerns within the mortgage process.
If you have more questions about how credit factors into mortgage qualification, you can visit our website or give us a call at (941) 485-4222 to learn more!
