Your Credit Report – Critical To Buying a Home and Obtaining a Mortgage

Article by Michael Roche

Inaccurate reporting continues to create havoc throughout the credit industry. The primary deficiency is clerical error which would seem to be an easy fix but usually it is not. Credit repositories (bureaus) will not make changes to the information reported by ones creditors without confirmation by the creditor. The creditor’s employees are reluctant to authorize the bureaus to change reported data without proof that information reported was erroneous. However, there are ways consumers can protect themselves.

How important is ones credit rating? Well, anyone who is applying for a mortgage or buying anything other than with cash, your credit rating will determine if you CAN obtain a mortgage or service, and WHAT the interest rate will be. Depending on how much the borrower wants to make the purchase, and what debt can be supported with wage earnings, the credit rating means a great deal.

Organizations, known as credit repositories (bureaus), accumulate financial data on people who have made purchases on credit. The data they collect is subjected to a proprietary analysis, which is converted into a three digit numerical “score”. Mortgage lenders, credit card companies, automobile financing companies, and just about every kind of creditor use the score, or rating to determine how credit worthy a borrower may be. Until recently, the credit bureaus jealously guarded personal credit scores, the information in the credit report and the formula used to calculate the score. The federal Fair Credit Reporting Act was specifically enacted to remove some of the secrecy. While it is not possible to determine how the numerical score is determined, consumers are entitled to see the report, and to have inaccurate information that may be included in the report removed and/or corrected. Sometimes that is easier said than done.

A widely reported case that resulted in the largest jury award thus far involving credit reporting proved just how hard correcting your credit history can be. An Oregon real estate agent spent six years trying to get TransUnion to remove the credit history of another woman from her credit report. The jury awarded the woman 0,000 for damage to her reputation and health, and another ,000,000 for punitive damages, which was subsequently reduced to ,000,000 by the judge in the matter.

An interesting question is why TransUnion was willing to go to such lengths to defend its position. The credit reporting agencies take their financial role very seriously. For them the integrity of the system is paramount. If lending institutions and credit intensive businesses cannot depend on the unflinching dedication of the bureaus to report credit history as accurately as possible, then business reliance upon their data would dissipate very quickly.

Unfortunately, there is a fundamental flaw in the way the credit agencies investigate claims that the data for an individual is erroneous. Typically, they go back to the creditor for confirmation of the information. That usually results in simply in a confirmation of the error. That does the consumer no good at all.

For those who are purchasing real estate and applying for a mortgage, the lender will secure a tri-merged credit report. This is a report that includes the files all three repositories and their subsequent scores. For several reasons the scores can be quite different. Usually the variance is a result of the creditors not reporting to all three repositories. Generally the mortgage underwriter will use the middle score to determine credit worthiness.

Following are some tips on how to keep your credit history accurate:

? Know what is in your credit report. You should obtain a copy of your credit report at least once a year.? Learn what your “score” means in the credit world. Generally, scores of 660 or better should qualify you for favorable interest rates and terms.? Act immediately toRelated Articles:

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