Often clients come to Valley Mortgage Company understanding just a little about the credit review process. It is not uncommon for a person to not know the details of their credit history or have some mistaken impression about their creditworthiness. Some have never seen a proper credit report. Yet credit is a key component to the mortgage process.
Credit analysis can come in many forms, but the report most relevant to mortgage financing is the triple merged-triple scored credit report. Credit bureaus across the country produce reports by collating information about your credit history typically from the three principle national credit repositories namely, TRANSUNION, EQUIFAX and EXPERIAN. When you establish a line of credit, the creditor may report your charging and payment history with one or all of these repositories. In turn each repository has developed its own credit scoring system which results in an actual numerical score included on your report. Since each repository uses a different formula for scoring and since each repository may collect different creditor information is it common that your report will contain three different albeit similar scores. The credit scoring system became prevalent during the 1980's as a way for lenders to quickly evaluate a potential borrower's creditworthiness. Lenders today heavily rely on these scoring systems to predict financial risk over time. A score in the low or mid 600 range typically meets the minimum requirements set forth by lender. The basic credit scoring formula takes into account several factors including the following:
Payment history - A good record of on-time payments enhances your credit score.
Outstanding debt - Balances above 50 percent of your credit limits work against your credit score while balances under 30 percent are considered desirable.
Credit account history - An established credit history is key. Having too few or too many trade accounts works against an ideal profile.
Recent inquiries - When a lender or business checks your credit, it causes a hard inquiry and potentially a slight ding to your credit score. Apply for new credit in moderation.
Types of credit - A healthy credit profile has a balanced mix of credit accounts and loans.
It is common for your credit report to contain some inaccuracies. Many times this is not relevant to your score or overall creditworthiness. However, under the Fair Credit Reporting Act, you are protected from having inaccurate information on your credit reports. If you find such an inaccuracy, you must contact both the creditor associated with the mistake as well as the repository recording the improper information. This can be a time consuming and sometimes frustrating process but it is essential for you to maintain a proper credit profile. Many consumers now check their credit history on an annual basis. We can secure your triple merged-triple scored credit report by our completing and returning the CREDIT REPORT REQUEST.
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