Credit Score and Report

About Your Credit

When you apply for a mortgage, The Walden Group will request a 3-in-1 credit report from a credit agency.

The primary purpose of a credit report is to establish if a borrower has a sufficient and satisfactory credit history for the loan requested, usually through a score calculation.

This score is based on a formula and represents a composite of your credit history, employment, ability to save, and so on and is used to determine your past willingness and ability to meet credit obligations which is indicative of your commitment to make payments on the new financing being considered.

The secondary purpose is to develop a complete summary of current debts that a consumer must pay each month. Credit reports also list any bankruptcies, foreclosures and legal judgments against a consumer.

Credit Issues

If you are worried about your credit history, you can take charge of your situation by getting the facts and taking the actions necessary to improve your chances for a mortgage approval. Many consumers have faced difficulties that resulted in credit problems.

The good news is that a consumer is no longer banned for life from obtaining a mortgage or other new credit. At The Walden Group, we have loan products for borrowers with less than perfect credit.

These products do not require perfect or spotless credit records for people who otherwise have demonstrated a good pattern of making payments. These loans allow borrowers to make higher down payments and obtain a loan immediately although the loans carry higher interest rates because of the greater risk.

However, if you can maintain excellent credit for twelve to twenty four months with the new mortgage, you can refinance the loan into lower rates later.

Fixing Your Credit

Credit reports are usually accurate, but they may contain errors and mistakes. You can obtain exact copies of your credit histories from the major credit reporting bureaus to verify their accuracy and correct any errors or mistakes. For instance, if you have a common surname or family members are Jr., Sr., III etc., you will be able to separate the accounts from family members or people not even related you.

You should contact all three of the major credit bureaus directly to correct any errors appearing on reports from each of those credit bureaus.

Each credit organization will send you a free copy if you have been denied credit. Otherwise a small charge may apply. You can contact each credit bureau as follows: Experian (888) 397-3742; Trans Union (800) 888-4213; Equifax (800) 685-1111.

A borrower preparing to apply for a mortgage loan should take several steps to maximize chances of approval and prevent unnecessary delays. First, list all current debts, including monthly payments, total balance and types of loans (installment, revolving, etc.) to determine what should appear on the credit report. Second, get the facts. Contact all three credit bureaus listed above for a copy of their credit report. Each bureau will send you a copy of the credit report, but the inquiry will not show up on the credit report as an inquiry because it was for the consumer. Each report will include a dispute form to challenge any incorrect information. Complete the dispute form for any items with which there is a disagreement and send it to each credit bureau.

When credit reports have been obtained review the monthly payment history for each account. As long as the majority of a borrower’s credit demonstrates a satisfactory credit history, a few minor delinquencies should not prevent approval for a mortgage, car loan or credit card. However, you should take three steps to insure that your credit report is reviewed in the most favorable light possible:

1. All credit delinquencies, no matter how minor, should be explained in a satisfactory manner to the lender. For delinquencies over two years old, the explanations can be brief. For credit delinquencies in the past two years, the explanations must be detailed as they may affect loan approval.

2. All credit inquiries (by other grantors of credit) that appear on a credit report should be explained by stating the purpose of the credit request, whether credit was granted or not, and the current terms. A large number of inquiries on a credit report reflects negatively because it appears to the lender that the borrower has applied to other institutions without success.

3. All charge-offs, liens and unpaid judgments, no matter how small, must be paid and shown as paid on all credit reports prior to obtaining a loan approval.

Maintaining Your Credit

If you have good credit scores or once you have been able to correct your credit report, here are a few things you can do to maintain or improve your scores from where you are today:

1. Pay all your bills on time.

2. Don’t apply for any new credit unnecessarily. Every time you sign and return a new credit card offering, or open that second account at a department store because you get a 10% discount, an inquiry will be generated and that will reduce your score.

3. Maintain credit card balances and keep credit lines open but try to keep them at a level that is 50% or below of the maximum credit limit. In other words, if the credit limit is $1,000, try to keep your running balance below $500.

4. Do not consolidate credit lines. Consolidating all your credit cards onto one can hurt you if the balance is at the credit limit.

5. If you get into a dispute with a creditor and it isn’t a huge amount, pay it and move on. Having one or more collections, even if they are small amounts, can really damage your score.

It pays to start preparing now.




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