Review, Build & Repair Your Credit

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Date
January 25, 2013
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Check Your Credit

Before you jump into the Homebuying process, it is important to know what is on your credit report.  If you have not seen your credit report recently, request your report from all three major credit bureaus: Experian, Equifax, and TransUnion.  You can pull your credit from all three bureaus for free once a year at www.annualcreditreport.com.  Keep in mind that you will get your report for free, but you must pay for your credit score.  If you have not seen your report or score recently, it is important to see both to know if you need to improve or fix anything before meeting with a lender. You can also mail in an Annual Credit Request Form to get your credit score from all three bureaus for free once a year. For those who have never seen a credit report, click here for a sample report with detailed explanations.

What’s in Your Credit Report?

Your credit report tells a history of your borrowing habits and how well you paid off your debts.  It also gives personal information, including past addresses and aliases, and shows who else is looking at your credit.  There may be a few surprises on there including inaccurate information, so make sure to be familiar with your report.  MyFico.com has information on what to expect to see in your credit report.

How is Your Credit Score Calculated?

First, you want to make sure to get your FICO score, as opposed to any other score that a credit bureau may independently produce.  There are many factors that go into your credit score and these factors can affect certain populations differently.  MyFico.com has more information on what is taken into account when determining your credit score.

Understanding, Building & Repairing Credit

Mortgage lenders look for a credit score of at least 660 when qualifying someone for a loan. In general, they look for a good credit history with at least 3 to 4 lines of credit. If you do not have any credit history, you may need to look into a secured credit card in order to start establishing a credit history. If you are looking to apply for a new credit card, make sure you are familiar with these credit cards secrets first. Sometimes you may encounter mistakes on your credit report that are keeping your score down. You have the right to dispute what is on your credit report. You can do this by submitting a dispute online via annualcreditreport.com or with a letter. You will want to make sure you do it properly, so use this sample dispute letter as a frame of reference to write your own. More information on understanding credit can be found in the Neighborhood Economic Development Advocacy Group.

Dealing with Debt

Debt can be a major obstacle to qualifying for a loan. Due to new standards, to obtain a typical mortgage your monthly debt (projected monthly mortgage payment plus all other monthly debt) cannot exceed 43% of your gross monthly income. Learn more about debt-to-income qualifying ratios on our Pre-approval page.

If you have completed the Homebuying 101 class with us and you are looking for help on how to manage and reduce your debt, email us at TheHomebuyingMentors@AllstonBrightonCDC.org to set up a meeting with one of our Mentors.

If you feel that your debt has gotten out of control, contact American Consumer Credit Counseling to receive professional assistance.

If you are struggling with student loan debt, or if your student loans are holding you back from qualifying for a mortgage, contact the Urban Edge Student Loan Borrower Repayment Counseling Program for free assistance.

Know Your Rights

It is important to know your rights as a consumer and a borrower.  Listed below are laws designed to protect you.  Make sure you are familiar with your rights to ensure they are not violated.

Fair Credit Reporting Act
Equal Credit Opportunity Act
Fair Credit Billing Act
Fair Debt Collection Practices Act

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