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Q. How do mortgage lenders use a credit report?
A. Your credit report is a critical part of your loan application. It lists in detail your current and previous obligations as reported to the credit bureau by the creditors. It is used to evaluate your mortgage request by showing mortgage lenders how you have handled your credit obligations in the past. If you would like to see your credit report, you can request copies of it from any of the three national companies that lenders use:
Trans-Union Corporation: http://www.transunion.com
Q. What is a credit score?
A. A credit score is an indication of your credit history and measures your ability to repay a debt in the future. It is a “track-record” of your payment performance to date.
Q. If my credit record is less than perfect, can I still buy a home?
A. Yes. Your credit doesn’t have to be perfect to purchase a home. Many people find themselves in difficult financial situations, often because of illness, divorce, or temporary unemployment. If you can demonstrate that the problem is in the past, and you have been able to re-establish a good track record for a sufficient amount of time, you may be in a good position to get a mortgage loan. There may be a reasonable explanation, so speak to your lender honestly and openly about the situation. It’s important to remember that lenders don’t just look at your past history, but also at your ability and willingness to pay in the future.
Q. How long is credit information reported on my credit report?
A. Generally, information is reported for up to seven years, however, bankruptcy information can be reported for up to 10 years.
Q. If I have a bankruptcy or foreclosure, can I still get a mortgage?
If bankruptcy or foreclosure was due to extenuating circumstances and has been fully discharged for at least 2 years, and you have re-established good credit, then you may be able to get a mortgage. Some examples of extenuating circumstances include: death of a principal wage earner, prolonged loss of employment for reasons beyond the borrower’s control, such as site closings, mergers, or reductions in workforce, or a long-term illness, or disability not covered by insurance. If the bankruptcy or foreclosure was due to financial mismanagement and has been fully discharged for at least 4 years, and you have re-established good credit, then you may be able to get a mortgage.
Q. Will one late credit card payment or loan default disqualify me from getting a mortgage?
A. Late payments (especially those fewer than 30 days) should not automatically disqualify you from getting a mortgage. Almost everyone at one time or another has forgotten to pay a bill on time, or has had trouble making a payment – mortgage lenders know this.
Q. Am I entitled to credit information that contributed to my loan denial?
A. You are entitled to that information if you request it from the credit bureau within 30 days after receiving a denial notice.
Continue reading the other “Credit” sections for more information on your credit report, what’s on your report and how to obtain a credit report.
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