Real Estate Search Direct

When was the last time you checked your credit report? Are you aware of everything that’s listed on your report? Many credit reports contain errors that seriously affect your score. You are entitled to a free annual credit report from each of the three credit bureaus.

Take Homer Buyer’s story, for example.  Homer was preparing to buy his first home.  He and his fiancée, Ivana Newhouse, plan to move in when they marry.

Homer found the perfect house and then he went to apply for a loan.  Homer had already discussed the loan over the phone with his mortgage broker, and the broker said he was sure Homer could qualify based on the information Homer had given him.

But when Homer went to meet the mortgage broker to fill out the loan application, he was in for a surprise. 

The mortgage broker told Homer there was no way he would get a loan.

Homer was shocked.  He said “The other day, you told me over the phone that there shouldn’t be any difficulty getting a loan.”

The broker replied “And you told me you had excellent credit.  You never mentioned you had a foreclosure! I pulled your credit report and there it was.  I don’t know of any lender that will lend to you, now.”

Homer was stunned. “Foreclosure? I’ve never even owned a house before!  How can I have a foreclosure on my report?”

The foreclosure turned out to be an error that one of the three major credit bureaus had made.

Homer was able to correct it by submitting a dispute to the credit bureau, but it took weeks to get straightened out. It put a lot more pressure on Homer if he wanted to be able to move in upon returning from his honeymoon.

Before you start shopping for a major purchase, such as a home or a car you should be sure your credit report does not contain any inaccurate information that might increase your chances to be denied or increase your interest rate.

The same applies if you are applying for a job or getting insurance.  Steps you should take are:

1. Request your credit report from all three credit bureaus.
2. Review your reports for accuracy.

• Check name and addresses.
• Check what inquiries are listed
• All credit accounts listed should be your accounts
• Check balances on accounts and credit limits
• Check for delinquent payments
• Check if any closed accounts are shown as active
• Check negative items: Judgements, bankruptcies, foreclosures

3. Dispute any inaccurate information on your reports
4. Verify that all inaccuracies are removed from your reports

These steps should be taken at least once a year whether or not you are planning to make any credit purchases;  it also helps detect identity theft.

You can get a free annual credit report once a year from each of the three credit bureaus.  Get them all. Some creditors only report to one or two of the bureaus, so there may be differences, even if there are no errors.

Your credit report will show any names you have had an account under in the past.  Make sure that your name is spelled correctly.  Dispute any misspellings.  If your creditors have your name spelled wrong, they should correct it.

You will also see past addresses listed on your credit report.  If any addresses are not familiar to you, it may be a sign of identity theft.  It may just be an error on the part of one of the credit bureaus or one of your creditors.  Make sure they correct it.

Having your name and address correct reduces the chance that you will have other errors based on the inaccurate identity information.

Every time someone pulls your credit, the inquiry will be listed on your report.  There are two types of inquiries: hard inquiries and soft inquiries.  A hard inquiry occurs when you apply for credit and the creditor checks your report.

A soft inquiry is when a business buys a list of names and addresses from the credit bureau that match a certain criteria.  They then send you offers in the mail such as credit card offers, life insurance offers, mortgage or refinance offers, etc.

You can request that the credit bureaus do not give out your information for these types of inquiries.

Hard inquiries, individually, will have a small effect on your credit score, but they can add up to make a significant difference.  Any hard inquiries that you don’t recognize should be removed from your report.  These also may be an indication of possible identity theft.

If any of the credit accounts listed are not your accounts they should be removed from your report.  You should initiate a fraud investigation if you see this.

Each credit account you have will have a balance and credit limit shown.  Be sure they are reported correctly.  The ratio of the balance to available credit plays a big part in the calculation of your credit score.

You should keep your balance below 30% of your credit limit on each of your revolving accounts (credit card or line of credit) to maximize your credit score.

When you have paid off and closed an account, the creditor may fail to report the status of the account.  This may stay on your record as having a balance indefinitely.  This can also affect your ratio of available credit to balance if a balance is shown on that account.

Each account will also list your payment history.  This is another big factor in your credit score.  If you have any reported delinquencies that are not accurate, you should dispute them.

Each account will also show the current status of the account.  Check this for accuracy.  This can damage your credit score if accounts are listed as in collection, or settled for less than the balance.

Your credit report may also contain derogatory items such as bankrupty, foreclosure, or judgements.  These items will seriously affect your credit score for seven to ten years if they are not deleted.

Any errors on your credit report can be disputed and removed by contacting the credit bureaus, but it is a lengthy process.  The credit bureau will have to contact the reporting creditor and ask for verification  to remove the errors.

You can also contact the creditor directly and ask them to remove the inaccurate information

Whenever a disputed item has been removed you can get an updated credit report free of charge.  The credit bureaus will also provide an updated report to any creditors that recently requested your report.

You should keep a close eye on your credit reports and do your best to maximize your credit score.  It plays a significant role in your finances.   To learn more about maximizing your credit score visit the improve your credit score page.

Allen Davis
Realestatesearchdirect.com