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The Importance of Your Credit Rating in the Home-Buying Process

Your credit history will determine the rate, term, and type of mortgage loan that you may qualify for. You should order a copy of your current credit report from the three major credit bureaus to review before submitting applications to mortgage lenders. This is important even if you believe you have a sound credit history.

Did you know that 40% of consumer credit reports contain errors?

If you want to make sure that a mortgage lender sees the best possible picture of your credit worthiness, you should correct any errors and address any negative entries before submitting a loan application. Federal law allows you to dispute inaccuracies in your credit report. If you believe there is an error on your report or you need to update the report to include payment of past-due accounts, you can go to the web site for any of the major credit reporting agencies and register your dispute online for quick resolution.

The agency will investigate your claim with the company that reported the negative information or error within 30 days and send you the results of the investigation. Although the companies that you do business with are required to report credit transactions accurately, maintaining the accuracy of your credit history is ultimately your responsibility. A bad credit history or failure to resolve any errors on your credit report does not mean that you will not qualify for a mortgage loan. You may still qualify but you will most likely pay a higher rate and term.

If your credit history prevents you from qualifying for a conventional loan you may have to apply to a subprime lender. You may even have to make your real estate purchase through a land contract. Therefore, a review of your credit report before beginning the mortgage loan process is definitely to your advantage. Taking the initiative to resolve any disparities on your credit report will also show prospective lenders that you understand the importance of your credit rating in the home buying process.

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