to Clean Up Your Credit
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. The primarypurpose of a
credit report is to establish that a borrower has a sufficient and
satisfactory credit history for the loan requested.
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
When applying for a mortgage loan, there are specific
guidelines established by mortgage institutions such as Federal
National Mortgage Association (FNMA) for obtaining a conventional
mortgage loan. These guidelines specify, "The borrower's credit
history should demonstrate his or he past willingness and ability
to meet credit obligations that will show the borrower's commitment
to making payments on the new mortgage being considered."
Underwriters are more concerned about a borrower's
overall pattern of making payments than they are about a few individual
occurrences. "A borrower who has made payments on outstanding
or previous credit obligations according to the contractual terms
will have a credit history that consists of no late payments and
no adverse or derogatory information (such as bankruptcies, judgments
or collections). To make sure that a borrower who has an otherwise
good payment history is not penalized for an occasional late payment,
we do not require perfect or spotless credit records."
While usually accurate, credit reports often contain
errors and mistakes. In the past, credit histories were a closely
guarded secret and consumers could only guess if they were denied
credit by accident or due to incorrect information. Today, consumers
can obtain exact copies of their credit histories from the major
credit reporting bureaus.
Whenever consumers are denied credit, they can obtain
a copy of their credit report to challenge and correct any errors
or mistakes. For instance, if a borrower has a common surname or
family members are Jr., Sr., III etc., he or she will be able to
separate the accounts from family members or people not even related
to the consumer.
A borrower 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:
TRW (800) 682-7654; Trans Union /Credit Bureau of CT (203) 931-2035;
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 type of loan (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 each separate credit report. Each bureau
will send 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.
Article continued at http://www.mortgagealmanac.com/articles/96-howtocleanupcredit.html