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Reviewing Your Credit

Credit involves the borrowing of funds with the intent to repay the lender at a later date, such as credit cards, car loans and student loans.  Lenders review your credit report to help determine if you are capable of repaying the ammount applied for.

  • Credit report. After receiving a loan prequalification request or application, the lender will request a credit report from the credit bureau. The credit bureau collects and organizes information about people who have credit. The information generally goes back seven to 10 years. This report includes your name, address, employer, length of employment and previous credit history. Credit history includes account types, balances remaining, payment status, collection information and inquiries.

  • Lack of credit history. Most traditional mortgage loans generally require some kind of established credit history. Some lenders offer flexible home loan options for people with limited or no established credit history. These options look at other ways to establish credit worthiness, such as timely payments of rent and utility bills.

What you should know about credit reports
Credit reports document your financial behavior over the past seven years - how much credit you have, how long you've had it and whether you pay your bills on time, among other things. Knowing what information is in your report can help you identify any problem areas and plan what steps you might take to correct them.

Three credit reporting agencies - Equifax, TransUnion and Experian - maintain credit reports. Lenders buy credit reports to help them decide whether to offer you a prequalification. You can also purchase a copy of your report from these agencies. Your credit report contains information about:

  • Credit accounts and payment history
  • Applications you have made for loans and other time payments
  • Personal information, including your name address and Social Security number
  • Employment information
  • Legal actions (for example, judgments, collections, bankruptcy)

Your credit report also carries your credit score, a numeric ranking between 300 and 850 that many lenders use to decide whether you are creditworthy. The score is used to help predict whether you'll repay a loan. It's calculated using five sources:

  • Payment history
  • Amount owed
  • Length of credit history
  • New credit
  • Types of credit in use

In addition to telling lenders your creditworthiness, your credit score can also influence the interest rate you pay. In many cases the hig

 

 
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