Mortgage Credit Center

The information in your credit report has a huge impact on whether or not you qualify for a mortgage loan and what interest rate a lender will offer. Therefore, it’s important your credit report reflects a positive image of the way you manage your money. If you're getting ready to buy a home, checking your credit report is the best way to ensure you get the loan and interest rate you deserve.

If you are thinking about purchasing a home or refinancing your current mortgage contact Rey Gallegos, your mortgage partner, at (702) 808-8328 or email and he can provide you with a credit report from all three bureaus. 

If you are interested in viewing your credit report before you contact him the easiest way to see what’s in your credit report is to contact the three national credit reporting agencies; Equifax, Experian, and TransUnion and request a copy from each. That’s because the three agencies are independent of each other and the information may differ on all three reports. In addition, you may not know which agency your lender will use to check your credit, so it’s best to verify that all three have correct information about your credit history.

If you've been denied credit, insurance, or employment because of information in your credit report from any of the three agencies, you can obtain a free credit report by contacting the agency within 60 days of receiving a denial notice. In addition, you're entitled to a free copy of your report each year when you certify in writing that (1) you're unemployed and looking for a job within 60 days, (2) you're currently on welfare, or (3) your report contains errors due to fraud. Otherwise, the agencies charge a fee for a copy of your report.

For additional fees, each agency may offer you different report variations, such as:

• A credit report with or without your credit score.
• A three-in-one credit report that lets you see a side-by-side comparison of records, from all three agencies, with or without scores.
• Notification services when your credit history is requested.
• Routine notification changes to your file.
• Subscriptions that allow you to access your report on a regular basis.

Also, a recent amendment to the federal Fair Credit Reporting Act (FCRA) mandates that each agency provide you with a free copy of your credit report, at your request, once every year, from the Annual Credit Report website. 

Whether you are thinking of buying a home or simply curious about what’s in your credit report,  it’s important to correct any errors you discover as soon as possible.  You don’t want errors in your credit report  affecting your eligibility for credit in the future. 

Before deciding on what terms lenders will offer you on a loan (which they base on the "risk" to them), they want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they're named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the fact they don't consider demographic factors is why they were invented in the first place. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider only what was relevant to somebody's willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Different portions of your credit history are given different weights. Thirty-five percent of your FICO score is based on your specific payment history. Thirty percent is your current level of indebtedness. Fifteen percent each is the time your open credit has been in use (ten year old accounts are good, six month old ones aren't as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit -- credit scores requested.

Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your FICO score.

These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Payment History

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
• Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
• Severity of delinquency (how long past due)
• Amount past due on delinquent accounts or collection items
• Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
• Number of past due items on file
• Number of accounts paid as agreed

Amounts Owed

• Amount owing on accounts
• Amount owing on specific types of accounts
• Lack of a specific type of balance, in some cases
• Number of accounts with balances
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History

• Time since accounts opened
• Time since accounts opened, by specific type of account
• Time since account activity

New Credit

• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
• Number of recent credit inquiries
• Time since recent account opening(s), by type of account
• Time since credit inquiry(s)
• Re-establishment of positive credit history following past payment problems

Types of Credit Used

• Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Please note that:

• A FICO score takes into consideration all these categories of information, not just one or two.
  No one piece of information or factor alone will determine your score.
• The importance of any factor depends on the overall information in your credit report.
  For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your FICO score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.
• Your FICO score only looks at information in your credit report.
  However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.
• Your score considers both positive and negative information in your credit report.
  Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your FICO credit score.

(Source: myFICO)