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Home arrow Business & Finance arrow Financing your condo, co-op, or townhouse
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CHECK YOUR CREDIT FIRST

Before you get too far in the process, you need to see what your potential lender will see, so you need to get a copy of your credit report before you apply for any mortgage loan.

I know this is probably not the first time you've heard this advice, but it still surprises me when people don't review their credit before applying for a mortgage.

There seems to be no end to companies that want to provide you with a free credit report as long as you subscribe to whatever credit service they're offering. The most common pitch is from companies that want to monitor your credit for you by letting you know when other companies are looking at your credit without your direct permission.

How can companies look at your credit data without your permission? These repositories have legal agreements with other credit issuers to which they sell data. When you get a credit card offer in the mail, or a solicitation for an automobile loan, if s because that credit issuer has paid for the privilege of seeing whether you have good credit. This is perfectly legal. And although it may be annoying sometimes, it does facilitate the issuance of credit. Whether people use that credit wisely is another issue.

A new trend regarding credit solicitations is via what is called “trigger” leads. A trigger lead is a lead sold to mortgage companies. It was so named because the lead is triggered when a consumer makes a mortgage application with a lender. When a mortgage lender or mortgage broker requests a credit report to evaluate, that request can turn into the form of a lead that can be sold to other mortgage companies.

Obviously, if a mortgage company is requesting a credit report on a particular borrower, then that person is seeking a mortgage. The repository sells these leads to other mortgage companies in lightning-quick fashion.

Some mortgage companies that buy trigger leads are made up of telephone sales reps that call you within hours after the initial credit request was made.

“Hi David, this is ABC Mortgage Company, and we're calling to see if we can be of any assistance today should you be thinking of refinancing or buying real estate.”

You might think that was an incredible coincidence, But in reality, it's nothing more than someone buying leads from a repository.

It goes without saying that in no way should you ever use someone who simply calls you out of the blue wanting to finance your property. You've already done your homework as outlined in chapter 3.

Where do you get your credit report to review? You can certainly subscribe to those various companies that want to monitor your credit for you, but that costs money. Alternatively, you can get one free credit report from each repository once every 12 months.

The three bureaus have established, at the federal government's request, a website where consumers can go to get their credit report. This site is at annualcreditreport.com. There are similar sounding websites that try and mimic the name to trick consumers into thinking they are going to a website that offers free credit reports and credit-monitoring services.

When you get your credit report, your next step is to review it. What to look for? Mistakes. Mistakes that show someone else's credit information on your credit report are good ones to check for. Is there a credit account showing up and you have no idea whom it belongs to?

Unfortunately, when three different credit bureaus try and track everything you've ever done credit-wise in your entire consumer life, it's possible mistakes will be made. Once you have an accepted sales contract and you have to dose within 30 days, there might not be enough time to fix the errors to satisfy the lender.

Do you have a name that may be more common than others? Is your first name Bob? Last name Jones? Then there's a greater chance of errors on your credit report simply because there are so many Bob Joneses in your town.

Another common mistake found on credit reports is accounts that appear to be open when in fact they have been paid and perhaps closed. If you had a collection account that you paid off, it's still possible one or more of the bureaus are still reporting that account as outstanding.

These bureaus do nothing except collect the data. They don't go out and verify it. Even if you paid off a collection account, if the business that reported the outstanding balance never contacted the bureaus to tell them that you settled the account, the bureaus would never know. In that case, it would be reported as still being outstanding.

Even if only one of the three bureaus has the dosed account listed as outstanding, you'll still be required to provide proof that the information being reported is incorrect.

Finally, another area where incorrect information can be reported is in the “Public Records” section, located near the very end of your report. Here is where any tax liens or judgments would be reported. Old tax liens can show up on your report, and you'd never know it. A tax lien can be filed for overdue federal and state taxes; it can also show up when it involves delinquent property taxes.

A credit report can indude your name, Social Security number, address, and even your previous employers.

The report will show the active accounts first, ones that are currently opened or being used. The report shows the following information:

• Business name that issued the credit

• Date the account was opened

• Account number

• Date information reported

• Last activity

• Credit limit

• Highest balance

• Number of months reviewed

• Current balance

• How many times past due

• Minimum monthly payment

That's a lot of information. Combine that with three different bureaus and people with similar names and you can see why mistakes can sometimes happen. It's not right that they happen, but they do. If s a business's responsibility to accurately report a customer's credit activity. Yet, sometimes it fails to do just that.

How can a bureau have information in it, correct or not, that is different from what the other bureaus are reporting? These three repositories are located in different parts of the country. Experian has a reporting branch in Texas. Transunion is based in Pennsylvania. And Equifax reports out of Georgia.

Local businesses may report to one bureau but may not report to the other two. National business will typically report to all three bureaus, but many smaller businesses only need to subscribe to one credit bureau (it's less expensive), so naturally that business would choose the bureau closest to it that would reflect local credit issuers as well as national ones.

 
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