Let me preface this post by saying I am not a mortgage expert. I can only communicate my experiences and information. However, if you started charging $10/month to a credit card when you were a teenager and don't have ANY late bill payments on anything, then you can skip this entire post. For the rest of us who hold their breath while their credit is run, read on...
There are 3 credit reporting giants. Why 3? More opportunities for someone to find something random that requires you to explain or get documentation that it does not apply to you.
Credit Reporting Agencies:
- Experian
- Equifax
- Trans Union
Often, one agency would report something that the other two would not. For example, someone named David Elkins in Florida was late on their Gap credit card payment (I hope they at least got a good deal on some nice jeans.) Anyway, the late payment showed up on ONLY the Equifax report and it was up to us to prove his innocence. Annoying, right?
Why do credit reports even matter? Because they determine what kind of loan you qualify for. The loan type determines the kind of buyer you are, how much you pay in closing costs, etc.
Random events that can hurt your credit:
- Someone checking your credit report
- Using up your credit line frequently. For ex: if you have $7500 credit line, charging $5000 to it each month. It's nice to rack up those rewards points but wait until after you buy a house.
- Late bill payments - for anything, credit cards, utilities, you name it
My advice: 6 months before you want to buy a home, start cleaning up your credit report. Your loan officer will give you all the details on what needs to be addressed. It can take a few months to dispute items, get documentation and wait for your report to update. Note: traveling down to Florida to find your impersonator is not tax deductible.
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