Preparing for homeownership

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Regularly reviewing your credit report is a wise practice, especially before making significant purchases like a home. Even if you consistently meet payment deadlines and manage debt responsibly, it's crucial to be aware of potential errors that could affect your credit score. If you check your credit report annually, it's advisable to do so at least 60 days prior to applying for a mortgage. This timeframe allows sufficient opportunity to address any issues that may arise. However, if it has been more than a year since you last reviewed your credit report, it's recommended to do so approximately six months before applying for a mortgage.

Your credit report serves as a comprehensive record of your credit-related activities, including credit cards, store cards, personal loans, car loans, mortgages, student loans, and lines of credit. Each account entry in your report includes information about the creditor, your payment history, the initial borrowed amount (for loans) or credit limit (for revolving credit), the current outstanding balance, and the account's opening date. Additionally, your credit report indicates if you have encountered any credit-related legal actions, such as judgments, foreclosures, bankruptcies, or repossessions. It also lists inquiries, revealing who has accessed your report. Inquiries are thought of as either "soft" or "hard." Only "hard inquiries" affect your FICO score, which is tracked by credit bureaus.

Three primary credit bureaus—Equifax, Experian, and TransUnion—are responsible for compiling and maintaining credit reports. Ideally, all three reports should align, but it's not uncommon for creditors to report to only one or two of these bureaus. 

The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) is an amendment to the Fair Credit Reporting Act, which governs credit reporting agencies. This Act grants consumers the right to access their credit reports. Under this legislation, you are entitled to receive a free copy of your credit report once every year.

To streamline the process, the three major credit bureaus have established a centralized platform called the Annual Credit Report Request Service. This service provides a single website, telephone number, and mailing address through which you can order your credit reports (Contact information provided below).

If you choose to request your reports online, you will gain immediate access to them. On the other hand, requests made via telephone or mail may take approximately two weeks to process. It's important to note that credit scores, including the FICO score, can be obtained from the credit bureaus for a fee, but they are not typically included in the free credit report. 

If you see any errors on your report, you should dispute these immediately as it will take some time for the credit bureau(s) to investigate. Disputes can be done online, over the phone, or by mail. Deciding which one to choose will depend on the type of error that you find. The credit bureau(s) have 30-45 days to investigate your dispute. Any inaccurate or unverifiable information must be removed from your report.

It's important to be cautious of the credit repair myth. Contrary to popular belief, it is not feasible to permanently eliminate accurate items from your credit report using the dispute process or any other means. The purpose of the dispute process is to rectify incorrect information exclusively. Companies that claim to remove negative accurate items from your report are engaging in deceptive practices, and their actions may even be illegal. It's crucial to be wary of such claims, as any fees paid to these companies can be exceedingly challenging to recover.

Requesting Annual Credit Report and the Credit Bureaus 

Annual Credit Report Request Service
P.O. Box 105281, Atlanta, GA 30348-5281
877-322-8228
www.annualcreditreport.com

• Experian
      P.O. Box 2104, Allen, TX 75013-2104
      888-397-3742
  www.experian.com
• TransUnion
      P.O. Box 2000, Chester, PA 19022
      800-916-8800
  www.transunion.com
• Equifax
      P.O. Box 740241, Atlanta, GA 30374
      800-685-1111
  www.equifax.com

Your credit report is divided into four sections 

1. Personal Information

Most reports begin with your personal identification information. It lists your name and any former names or aliases, your current address and former addresses, and sometimes your employment history and marital status.

2. Trade Lines: 

This section includes the bulk of your history of handling credit. The information in this section include: 

· Creditors and account numbers

· The date accounts were opened

· Credit limits or original balances

· Whether accounts are individually or jointly held

· Balances and payment patterns for the last 24 to 36 months

· Whether accounts are in collections or in dispute

3. Public Records

This section shows public records that are related to credit worthiness, such as liens, bankruptcies, repossessions, judgments, foreclosures, and court-ordered child support arrears.

4. Inquiries

In this section, you will find a record of individuals or entities that have accessed your credit report. These accesses, known as inquiries, can be categorized as either "hard" or "soft." A hard inquiry occurs when you initiate an application or transaction, such as applying for a new credit card. On the other hand, a soft inquiry takes place when you personally request to view your credit report or when it is checked for non-credit application purposes. Soft inquiries are only visible to you and do not impact your credit score.