Kieber: A layman’s guide to credit reports (column)
Those who are looking for a new mortgage to purchase a home, or are looking to refinance, the one question they all have is: What are my credit scores? And more importantly: Are my scores good or bad?
You need to know that with every file, we obtain a three-bureau credit report. The three agencies that we rely on are Equifax, Experian and TransUnion. Each of these companies gather your credit information and supply to us the details of your credit accounts that are open with balances, open with no balances and credit accounts that you have closed.
In addition there are lists of your know address and aliases. Plus there is a section in this combined report that will list if you have had a bankruptcy in your financial past. All this information has an effect on your credit scores.
The scores themselves are important as the interest rate you can receive are partially based on the mid score. We use the mid score as that is a way to determine your probability of paying the mortgage in a timely fashion. You should know that the organization that issued you credit may not report your account information to all three of the credit bureaus. Say you have a car loan from a lender who works with a preowned car dealer that lender may only report to one or two of the bureaus. So this would reflect upon the credit scores.
Now down to the basics of the scores. If all of your scores are rated at 800 or better, you have been handling your finances correctly. This shows you pay your bills on time and do not abuse the credit you have. If your scores are around 700 you are right around the average person’s scores. Not exceptional but not bad. The mortgage rate should be close to those with 800 scores.
If you have scores around the 600 level you may have a difficult time receiving an approval on a mortgage at a decent interest rate. The rate will most likely be as much as a full point above those with a 700 score.
Your credit scores are a very important part of the mortgage process. Know that the credit bureaus only report what is reported to them by those you give you credit. It is your responsibility to monitor your scores. If there are incorrect items on your report, work on getting these items corrected early on. Do not wait until it is time to finance or refinance a mortgage.
Robert (Bob) Kieber is a long time resident of the Summit County and has been closing mortgages for over twenty years in Colorado and nationwide. If you have a questions Bob can be contacted at 970-485-1312 or e-mail him at rkieber@boeMortgage.com.
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