Your credit reports are the cornerstone upon which mortgage financing is built. A good credit report is adequate to obtain financing, in many cases; a great credit report is even better. Credit reports form a large part of the basis on which mortgage companies decide whether or not to extend mortgage financing. What are credit reports, and how do they influence your mortgage financing options?  

Credit reports come from three major reporting agencies.

Credit reports are basically credit histories compiled and scored by three major credit reporting agencies: Experian, Equifax and TransUnion. You can obtain copies of your credit reports directly from these reporting agencies, typically for a fee.

You can also sign up for credit monitoring, which may enable you to view your credit report and FICO score at any point; check individual credit monitoring services for details. Credit monitoring does come with a fee, but it can also serve as an early warning system for identity theft, so it can be a worthwhile investment.

Order your credit reports from all three credit reporting agencies.

You never know which agency a mortgage finance company uses, so you should pull copies of your credit reports from all three credit reporting agencies for evaluation. When you order a credit report, you don’t typically get your FICO score included; you may have the option of paying extra to see your FICO score.

When you examine your credit report, you’ll see several different sections. One section lists all of your current accounts, your payment status on each and typically your balance and credit limit. Another section lists contact information, including current and prior addresses and phone numbers. Other sections list inquiries, which show up when you apply for credit and loans, and a final section lists collections and public records, such as judgments and liens.

You may find that different agencies reflect different accounts; some creditors only report to one or two bureaus, or don’t report at all, so you never know what you’ll see until you look.

As the document upon which mortgage financing companies base their decisions, your credit report is an invaluable tool in the mortgage financing process. Before you apply for mortgage financing, you need to correct any erroneous entries on your credit report and make sure it reflects the most up-to-date information.  

Correct erroneous identifying information on your credit report.

First and foremost, examine the identifying information on your credit report. Are your name, current address and prior addresses correct? How about your social security number? Incorrect identity information can result in mixing up your credit with someone else’s, and that can have a serious adverse effect on your credit score.

Additionally, when a lender goes to underwrite your loan, you may run into trouble if the information you provide doesn’t match the information on your credit report. Correct any erroneous identifying information to avoid trouble.

Make sure your credit report shows correct account information.

Creditors and credit reporting bureaus sometimes get account information wrong. If your credit report reflects incorrect account information, you may run into a situation where a discrepancy reflects poorly against your actual credit history. Make sure account numbers, balances, opening date and payment information are correct for each and every account on your credit report.

Some creditors may not report to all bureaus, so don’t be surprised to see an account show up on one credit report and be missing from another. If an account is on multiple reports, make sure each report reflects the same, correct information.

Remove old items that may negatively impact your credit rating.

After a certain period of time, old items should automatically drop off of your credit report. However, some companies continue reporting old debts after they’re legally obligated to stop; your vigilance can protect you from this.

Different types of items are permitted to remain on your credit report for different periods of time; find out the specifics for your negative items to see whether creditors are erroneously reporting them. If you find a negative item that should be gone from your report, dispute it. Removing one negative item years ago can make a big difference in your ultimate financing options.