Your credit score is a one look number at your overall credit rating. There are major variables to derive the score, including: public records, late payments, how recent and the number of late payments, amount of credit open, balances on credit open compared to available credit, and inquiries into your credit history. Each of the three major credit bureaus (Experian, TransUnion, and Equifax) offer a credit score for each borrower. So for a married couple there are six credit scores. Credit scores can vary on a range: below 620 is poor, 620 -650 marginal, 650-680 nothing special, 680-700 fairly good, 700-720 good, 720-750 very good, above 750 is excellent. Before deciding on what terms they will offer you a loan, lenders want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score. The most widely used credit scores are FICO scores which range between 350 (high risk) and 850 (low risk). Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score. Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage. f you do encounter a mistake on your credit report, there are several steps you can take to correct the matter: 2 . Check credit report dispute status When credit reporting agency receives your dispute request, they will contact the data provider or information source. That source has 30 days, sometimes up to 45 days, to investigate whether the information reported is accurate. If the data provider or source does not respond within the required timeframe, credit reporting agency will remove the information from your credit report. If the company that provided the information to credit reporting agency verifies the record, it will remain on your credit report. At the completion of the investigation, you will be notified whether the information was verified as accurate and will remain on your credit report; was modified in some way; or was not verified and has been removed. If the data provider or source cannot verify the information, it will be removed from your credit report. Otherwise, the information will be updated as instructed by the data provider. 3. While you have a credit dispute pending, it is recommended that you wait to apply for credit. This will ensure that the most current credit report is available for a creditor or lender to review when making a credit-related decision. 4. With an online credit dispute, you will be notified via email and given access to the results of the investigation immediately and receive an updated credit report once the investigation is complete. 5. Concurrently, you should contact any company that reported the error on your credit report. Include copies of documents that support your dispute and request their response/resolution of the matter in writing. If you have outstanding debts on your credit report that you are trying to negotiate, contact that company in order to come to an agreement – always get any agreed upon terms in writing. Credit reporting agencies like Experian are governed by the federal Fair Credit Reporting Act (FCRA) and companion state laws. The FCRA permits credit agencies to list positive information on your credit report indefinitely, although it generally remains for 10 years. Accurate negative information, such as a late payment or an account turned over to a collection agency, can remain on your credit report for seven years. Bankruptcies may remain on your credit report for up to 10 years. Unpaid tax liens may remain for up to 15 years. Your mortgage broker has access to Automated Underwriting Programs which are computerized, sophisticated programs that analyze your strengths and weaknesses as a borrower against a lender’s guidelines/requirements. These programs are called “Desktop Underwriting” or “DU” or “Loan Prospector” or “LP” and they produce an indication of how the lender will view your loan application, such as “Accept” or “Refer”. Please know a DU or LP approval is not a full approval. It is more of an indicator of how the lender’s underwriter will view your entire loan package. Your mortgage professional is able to provide you with a DU or LP approval. When borrowers make their monthly mortgage payments, they generally also pay one-twelfth of the anticipated annual amount needed to pay taxes and insurance premiums. These additional funds are deposited into an escrow account until the lender pays the taxes and insurance premiums as they come due. The borrower benefits for budgeting reasons because costs are spread through the year rather than as a lump sum. This method allows the lender greater control in avoiding tax delinquencies or lapses of hazard insurance coverage on the property. Mortgage documents often stipulate lenders that establish an escrow account. An escrow officer is the person that walks you through the closing process. They are usually employed by the title company that you are working with. They are a neutral third-party, responsible for overseeing the escrow process. They typically perform the title searches, prepare final paperwork, witness the document signings as well as ensure that the transaction is executed properly and legally.
