Credit Information You Need To Know
Credit means you are borrowing money from a person or company to buy a particular item, and agreeing to return the borrowed money at a later time. The money that was borrowed is called a loan. A loan usually has two parts, the principal (the actual amount that was borrowed) and the interest (money paid in addition to the principal for the privilege of borrowing the principal). A loan is a legally binding agreement, so it is important to examine all aspects before taking a loan. Good credit means the individual has made loan payments on time and repaid their debts as required. When a person has good credit, a lender is more likely to lend money, since that person already has a proven track record.
In order to buy a home it doesn't require perfect credit, but does require good credit. You can tell if you have good credit by ordering credit report. A credit report can be ordered from any one of the 3 credit reporting agencies Equifax, Experian, or Trans Union Corporation. You will need to give them your name, phone number, address, date of birth, social security number, and current and past employers. The information may vary slightly from each reporting agency, so you will want to check all three.
It is a good idea to check your credit report at least once a year for fraud and to ensure there are no mistakes. Errors, incorrect or outdated information can affect your ability to get a loan. On the positive side if there is a mistake, there is no charge to correct wrong information. Usually the procedure of correcting errors will appear on the credit report itself. Otherwise call the appropriate entity and tell them about the error. The agency could ask for more information such as cancelled checks etc, thus good records is a plus. Another option is to write a letter detailing the error, by law the agency must investigate the claim in 30 days. If an error is found they must also inform the other credit agencies. Still another option is to contact the creditor and attempt to resolve the dispute, when resolved you should have the creditor send the correction to the credit agency. If the dispute remains unresolved you can write a 100 word explanation about what happened. The creditor claim will still appear on your report, but the explanation will also appear. Mistakes on your credit report should not be ignored, since they can seriously affect your ability to obtain loans in the future.
It is important to know your
credit report information.
Lenders use the credit report as basis for computing a credit score. A credit score assigns point values to items on the credit report. The method used to find your credit score varies, however in all cases the higher the score the better. Each agency has a proprietary scoring technique, however most lenders will require that you either apply with Fair Isaac's FICO score or with VantageScore.
Understanding credit score
and how the agencies determine your credit score is very important, since your credit score is perhaps the biggest factor in getting a loan.
If you have a lower credit score, you should
raise your credit score
before applying for a loan, since a higher score usually means a lower monthly payment. Credit score is usually based on payment of credit card debts. If you do not have a credit card, or have never taken credit, you may be able to apply for a
no credit history loan
by using a non-traditional credit history.
Return from Credit Information You Need to Know to Home Loans Demystified!