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Understand Your Credit Report Before Home Buying and Things May be Easier

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By : marco benavides    99 or more times read

One of the first things that you should do is to get a copy of your credit report before you buy a home, and it may help make things simpler. You need to understand the contents of your credit report because you lender will decide if you should get the loan, how much you should get and the conditions under which you will get the loan based almost entirely on the report.

Your credit report contains data that is plugged in to software that analyzes it, and the software comes up with a number. Unfortunately, the three major reporting agencies may not necessarily use the same software, and you might discover that you have three different credit scores.

You should not worry too much over that because lenders will usually take the middle score estimate your risk. It has been shown time and again that it is the borrowers with the best scores who usually pay off their loans, which is why lenders rely so heavily on your credit score.

You should begin to worry if your credit scores are below 700, and you should really be concerned if your credit scores come up below 620 because that is the point where terms and conditions get really tough for borrowers. At 700 or above, you can usually get the best rates and you may be offered different forms of financing, but they will not be options offered if you have a low credit score.

Once you have your copy of your credit reports, you need to go through them very carefully to make sure they are accurate. You should concentrate on the areas of payment history and amounts you owe. These will account for almost two-thirds of your credit score, and it can really hurt you if there are any negative marks that should not be there.

If this is so, then you need to contact the CRAs immediately and insist that your credit should be changed to accurately reflect your credit history. However, this is not something that is going to be accomplished overnight, so you have to be patient but persistent.

You should check your credit reports as soon as possible because you need to present the best picture possible to lenders to get the best terms you can on your loan. Therefore, it is essential to present a clean and accurate credit report, with a score of at least 700. You need to show that you will be a good risk because the bank is going to be lending you a lot of money on a mortgage loan, and the bank or other mortgage lender wants to be as sure as possible that you are going to pay the money back.

Once you know that your credit report is in order, you can start shopping around with the different lenders, and you should try to get the best terms available. You should try to get your mortgage pre-approved, and that will make home sellers take you more seriously as a buyer. After all, they will know that you have the money at your disposal if you decide to buy the house you are considering.
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