Your Credit and Buying Real Estate

What determines your credit score?
Source: myFICO.com

Your credit score is one of the most important factors in your ability to qualify for a loan and then getting the best rates.  If you are considering applying for a mortgage you may be well served doing a little investigation of your own before having a third party pull it for you.  Is the information accurate?  Is there something that needs to be addressed or might improve your score? FICO doesn’t release the exact terms of how your credit score is determined by the three reporting agencies (Experian, Equifax and TransUnion) but they do disclose that each angency uses different data to compute scores. Your lender will most likely use a blend of the three scores.

myFICO.com has an education page which has some great information about your credit.  Warning: read the fine print to “YES! Get my FICO Score. FREE”.  The second page of the request makes it clear that you are signing up for a service costing $12.95 a month.

You can order your credit report for free, not your score, every 12 months from the three reporting agencies through AnnualCreditReport.com.  You can add your score for a fee.  I just pulled my report through Experian and opted not to pay the $7.95 fee for the score (I have no potentially negative items in my report).  I try to alternate agencies every six months rather than pulling them all at once.

Any interesting tidbit on loan modifications: will a loan modification affect your score?  Maybe.  Not all creditors report loan modifications and then those that do don’t all report it the same way.  The safe assumption is to assume that it will have an impact.

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