Sitting across the desk from the Loan Officer or Home Loan Broker can be intimidating. One of the first questions they will ask is, “Do you know your credit rating?” Investopedia has a great post on what a credit rating is. Check it out before going further, It will give you awesome insights and information.
Credit Scores
To get us started, let’s look at credit scores. Your credit score is NOT your credit report. Check out this video to the right so you can get warmed up:
Basically, credit scores break down into 5 categories:
- Excellent: 750 and above
- Good: 700 to 749
- Fair: 650 to 699
- Poor: 550 to 649
- Bad: 550 and below
Again, the people at Investopedia have great information on credit scores that you should check out for a better understanding before you grab your information and start trying to understand it.
Credit Reports
Like we said before…your credit report is NOT your credit score. They are two different things. Your credit report is used to make your credit score.
Your credit report is simply the register of your credit usage. Where you have credit accounts, your available credit at each account, your balances owed, and your payment history. Your report will also show where you have applied for credit, and who has ran a credit report on you.
When you wanted to apply for that car loan last year, but you never went through with it…they ran a credit report on you. If you are shopping around for a car and several car dealers run credit reports on you, every request for a credit report is also recorded on your credit report. If there are too many hits looking for credit on your report.
Step 1: Free Credit Report – Get Yours
The federal government mandates that every consumer can get a free credit report one time each year. You can get your free comprehensive credit report in one easy step from all three reporting agencies (Equifax, Experian, and TransUnion) by going to annualcreditreport.com or call 1-877-322-8228.
Review your reports. Make note of any account or transaction you don’t recognize. This will help you understand what makes up your credit score.
Step 2: Monitor Your Credit Hits
FICO is the clearinghouse typically used to determine your credit score. You can sign up at FICO for credit monitoring with a monthly fee and for the $19.95/month you can get your score sent to you so you can keep tabs on how you are doing as you try to increase your score to get the best rates when it comes to securing financing to purchase a home. They also give you credit monitoring and even help with identity theft restoration for that small monthly fee.
Zander, recommended by Dave Ramsey, is a super personal way to monitor your credit and repair it if you need help. It provides monitoring services like others credit monitoring services, but Zander also assists in recovery from identity theft while also replacing items when they are lost, like when your wallet goes missing. With plans from $6.75/month for individuals, and $12.90/month for a family (including all children under 18) we see this as a leader in the industry.
Step 3: Get A Free Credit Score – Everyday
Get your FREE credit score! Yes, it’s free! It is a bit scary giving your personal information to a website, but this is a safe and free way to get your credit score right away from the comfort of your own home. Sitting in front of a lender and asking for a loan will be less anxiety filled if you know your individual credit score.
Now you have to go to Credit Karma and take the 5 minutes to grab this information. Once you sign up at Credit Karma, you will also be able to see details on what makes up your credit score. The credit cards, bank accounts, and other information that is being reported on you all exist in your dashboard at Credit Karma. You can also drill down in the linked reports from TransUnion and Equifax in this simple and easy online report. It is super simple, easy to use, and safe.
You can also get the Credit Karma App for your phone. Once you download the app, you can put in your login information, and have your up to date credit score on the fly. So, now when you sit with a lender, you can answer the questions related to your credit report, and your score all in the palm of your hand.
My Real Estate Advisor Team is licensed to practice real estate as a broker in the state of Oregon and is not a licensed appraiser, mortgage broker/lender, or licensed financial advisor. Any financial advice received from the My Real Estate Advisor Team is for information only. My Real Estate Advisor Team makes no legal or promissory statements to the actual financial market at the time of this post. You should always contact a licensed financial advisor or lending professional to seek actual financial advice for your specific situation.
