National Association of Mortgage Brokers Helps Consumers Understand Importance of Credit Reports

McLean, VA – Purchasing a home is among the most important financial decisions a person will make in their lifetime. Understanding one’s credit score and how it affects qualifying for a mortgage is an important step on the path to homeownership.

Your credit score is a number between 300 and 850 that lenders use to help assess the risk they take if they provide credit to you, whether it’s a car loan, credit card or home mortgage. It is also used to determine the interest rate they will charge you. The higher the score, the more likely you are to receive a better interest rate.

Three national consumer reporting agencies – Equifax, Experian and TransUnion – calculate credit scores based on information that creditors voluntarily provide. The scientifically-calculated scores are based on your credit profile at the time your credit report is requested. This includes payment history on past and current accounts, how well you manage your credit, the length of time your accounts have been open, and other factors.

NAMB offers the following tips to consumers:

How to obtain your credit report

·  Under a federal law being phased in through September 1, 2005, you can obtain a free copy of your credit report every 12 months from each of the three independently-owned consumer reporting agencies.

·  For more information on ordering your free credit report, visit www.annualcreditreport.com, or call 1-877-322-8228, or mail a request to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Understanding your credit report

·  When you receive your report, highlight the head of each column that identifies the data below to make it easier to read.

·  Review the information to be certain it is correct.

·  Search for any late payments of 30 days or more and when they occurred. The more recent the late payment, the bigger the negative effect it can have on your credit score.

·  Be aware that you can have different scores on each report – not all creditors report to all three consumer reporting agencies. However, most scores will be within a few points of each other.

·  Mortgage brokers will check all three credit reports and generally use the middle credit score.

·  Be sure to do your shopping for “like types of credit” all within a focused 45-day period. Multiple inquiries for similar types of credit (e.g., car loans) made within 45 days – regardless of the amount – are treated by the scoring model as a single inquiry in the calculation of the credit score.

How to improve your credit score

·  Pay your bills on time.

·  On each credit card account, keep balances to 30 percent or less of your available limit.

·  Avoid consolidating credit cards and then closing out the zero-balance accounts. Small balances on a few credit cards are better than a large balance on one account.

·  Use your credit cards at least once every six months. In order to receive a credit score, your credit file must have at least one account open for at least six months.

·  Be careful with department store credit cards – many do not offer grace periods, so a late payment (even a few days) could be immediately reported as past due.

·  If your credit score is high enough to qualify for the loan you want, do not immediately try to fix any misreported information on your credit report without the advice of a financial professional. Arbitrarily trying to repair the misreported information could inadvertently lower your score.

·  Do not pay off old unpaid accounts just before closing on a mortgage because it could trigger an update to your credit report and lower your score. This means you may not qualify for the loan you want.

·  Pay attention to paper work marked “not a bill” from health care providers. If your insurer doesn’t respond to or pay a medical bill, medical service providers often will immediately turn over the debt to a collection agency and you are ultimately responsible for payment.

·  Beware of advertisements claiming to improve your credit score by deleting accurately reported information. If you need to improve your credit score, or manage your debt, turn to a reputable NAMB-affiliated mortgage professional for advice.

NAMB-affiliated mortgage professionals can help consumers navigate through the home buying process, including how to improve one’s credit score. For more information, visit the National Association of Mortgage Brokers Web site at http://www.namb.org/.

###

The National Association of Mortgage Brokers is the voice of the mortgage broker industry with more than 27,000 members in all 50 states and the District of Columbia. NAMB provides education, certification and government affairs representation for the mortgage broker industry, which originates 68% of all residential loans in the United States.