How Does the Underwriter View My Score?
If you are considering a home purchase, it is in your best interest to make every effort to increase your credit scores as early in the process as you can, especially if you know you have issues you should be dealing with. It is often the case that people are not aware of bad marks on their credit record until they apply for financing for a major purchase, such as a home.
Today, you have access to your credit information all day and every day. This is wonderful news. Consumers now have the opportunity to quickly correct and maintain credit reports. It is mission critical for consumers to seize that advantage by assuming responsibility. Lenders, employers, and vendors judge us based on our credit reports, and they know that we are capable of doing so. The days of excuses are in the rearview mirror.
Reports from the credit bureaus*. You can get started by acquiring a copy of your credit reports from each of the three major CRAs. It’s important to get reports from each of the three–not just one. The CRAs do not share data, so you need to get a full accounting of everything that is being reported.
The reports that you receive directly from the three credit bureaus are easy to read. More importantly, going straight to the source of the data will ensure that your action plan begins with the most complete information being reported about you. This includes your credit accounts, your credit history, and your personal and demographic information.
You can order your credit report and score from each credit bureau online, through the mail, or via telephone. Here is the information you need:
- Equifax: (800) 685-1111 – http://www.equifax.com Cost: $15.95
- Experian: (888) 397-3742 – http://www.experian.com Cost: $15.00
- TransUnion: (800) 916-8800 – http://www.transunion.com Cost: $14.95
Be sure to call for the most recent mailing information when you are ready to contact the bureaus by mail. You can also use these numbers to order your reports by phone.
Free credit reports*. By law, each of the CRAs must provide a free copy of your credit report, at your request, once every 12 months. To read more about this, a good source is the Federal Trade Commission’s Consumer Alert that you can download here
You can access this program in one of three ways:
a) Go to http://www.annualcreditreport.com; or
b) Call 1-877-322-8228; or
c) Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can download the form with instructions at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt156.pdf.
Remember, annualcreditreport.com does not offer free credit scores with your reports. However, you can purchase your score at the same time that you order your free report for around $7.95 per bureau. To have a complete picture of where you stand with your credit, it is always recommended that you order your scores at the same time.
The underwriter who is making the decision as to whether or not you should get the loan you are asking for will generally look at the scores generated from all three CRAs. Typically, the score will not be the same from all three reports, and the underwriter will consider the middle score as a barometer.
*SOURCE: Linda Ferrari’s Book, The Big Score – Getting Your Reports, www.lindaferrari.com
Disputing Errors On the Credit Report
The U.S. Public Interest Research Groups (USPIRGs), conducted a 30-state study on the subject of credit scoring, and published their own report: Mistakes Do Happen: A Look at Errors in Consumer Credit Reports. The study revealed that 79% of consumer credit reports contain errors. What’s more, there’s a one-in-four chance your credit report contains an error serious enough to cause you to be denied credit.
Here’s a breakdown of their findings:
SOURCE: U.S. Public Interest Group Research; One In Four Credit Reports Contains Errors Serious Enough To Wreak Havoc For Consumers, US PIRG Press release, 06/17/04
If you find that you have errors on your credit report, follow this procedure to correct those errors.
- Twenty-five percent (25%) of the credit reports contained errors serious enough to result in the denial of credit;
- Seventy-nine percent (79%) of the credit reports contained mistakes of some kind;
- Fifty-four percent (54%) of the credit reports contained personal demographic information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;
- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.
- Make a copy of the report and circle the item(s) you are questioning. Keep your original copy for your own records.
- Prepare a letter to the CRA that provided you with the report in question, and request to have the erroneous item(s) removed or corrected. If you have proof of payment for an item in question, include a copy of that documentation.