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Understanding Your Credit Report
by Randall F. Brahe, Jr.
One of the major areas a lender looks at when taking a mortgage application is the buyer's credit history. The credit report provides an overview of a borrower's current and past debts and obligations, and is a key factor in the lender's decision making process.
It is important to understand the significance of credit and the reporting process. Credit bureaus are organizations that collect and report information furnished to them by banks, retailers and other credit providers. The information is simply reported, not analyzed by the bureau. Information includes the balance of each account, the amount due, current or delinquent status of the payments and actions taken to collect the account. Each time your credit report is requested, the inquiry request is noted on your file for a six month period.
Credit reports sometimes contain errors, and consumers need to take actions to correct incorrectly reported information. The Fair Credit Reporting Act requires credit bureaus to correct incomplete or inaccurate information at no cost. Correspondence and documentation supporting your claim must be submitted to each credit reporting agency to so that they may investigate disputes in a timely manner. If there is no resolution, the consumer may file a statement of up to 100 words to explain their position. There are three credit bureaus: TRW, Equifax and TransUnion.
Derogatory credit information remains on your report for up to seven years; bankruptcies, judgements and repossessions remain on the report up to 10 years. If you have been denied credit based on information in your report, you may request a copy. If you are like most consumers, you have never seen your credit report. TRW offers one free report per year, write to this address to request the information:
TRW Consumer Assistance, 660 North Central Expressway, P. O. Box 949, Allen, Texas 75002, (800) 682-7654.
Today, many lenders are more flexible with credit requirements so that they may work with potential homebuyers at all income levels. If you have a problem with your credit history, contact your lender for help.
Randy Brahe is Regional Vice President with First American Real Estate Information Services, with corporate headquarters in Uniondale, New York.