If you’re planning to buy a new house in 2021, the most important thing that you can do to prepare for that process is to check your credit reports from all three national credit bureaus. (Transunion, Equifax and Experian)
The simplest (and cheapest) way to obtain a recent copy of those reports from all three bureaus is to go to annualcreditreport.com. Here is a link to that site:
Annualcreditreport.com is the site maintained by the three national credit bureaus, as required by federal law (the Fair Credit Reporting Act.) Until the coronavirus pandemic occurred, you were only allowed to obtain your reports from this site without a charfe one time a year. From now until April of this year, you can obtain your reports free of charge once a week from this site. These reports will not result in an inquiry reporting on your credit and will not impact your credit scores.
Annualcreditreport.com will not provide you with your credit scores for free, they will charge you to get them. There are other sites out there that will give you your credit score for free. (one example is freecreditreport.com)
Make sure that the score that you obtain is a FICO score, not a Vantagescore. Mortgage lenders almost exclusively use FICO scores when making lending decisions. Vantagescores are more readily available for free from sites like creditkarma.com. (Freecreditrport.com. above will provide you with a FICO score, although it is much newer version of the FICO score than the ones that are used by most mortgage lenders.)
Vantagescores can, and do vary significantly from FICO scores, though, often by as much as 60 points. (This is because the two scoring models use different algorithms to compute their scores and also consider different data in their scores.
Once you have your hands on your credit reports, you should review them carefully for errors. It has been our experience that approximately 25% of credit reports contain significant reporting errors.
If an error is identified, you can request that the credit bureau reporting it make a correction. This request should be made in writing, through the US Mail. It is possible to make this request online, but doing so may waive important legal rights that would otherwise be available to you. (For example, online disputing changes the rules for the credit bureaus to “reinsert” a derogatory item to your report after it has been removed.)
Getting the credit bureaus to correct mistakes takes time and can be frustrating. Don’t wait until the month before you want to buy a home to start this process. You must be diligent, pay attention to details and be disciplined with following up with the bureaus when they don’t properly respond. Many people find it easier and more efficient to hire an experienced well qualified credit restoration company to handle this process for them.
You may also want to check with local lenders to find out what credit scores they require you to have to qualify for their mortgage loan products. Different loan products (FHA, VA or conventional) typically require different credit scores to qualify for them. It’s helpful to know how much your score needs to increase before you make the decision to attempt to restore it on your own.
If you have questions or concerns, feel free to give Phoenix Credit Consultants a call (314) 429-2040. You can also email us at firstname.lastname@example.org. We will be happy to help!