Credit

A credit report is a record of your credit history. It includes information about your credit accounts, payment history, outstanding balances, and certain public records. Lenders may review your credit report when evaluating your mortgage application.

Credit reports are maintained by consumer reporting agencies, commonly known as credit bureaus.

Yes. You have the right to request and review the information in your credit report. Your report can also show which companies have accessed it, helping you review your information for accuracy and identify anything that may need to be corrected.

Credit reports may include several types of information:

Personal Information
Information used to identify you, such as your name, current and previous addresses, date of birth, Social Security number, and phone numbers.

Credit Accounts and Payment History
Information about current and past credit accounts, including account balances, credit limits or loan amounts, payment history, and whether an account is current, past due, or in collections.

Inquiries
A record of companies or organizations that have accessed your credit report. These may include lenders and other businesses with a permissible reason to review your credit.

Public Records and Collections
Certain financial public records, such as bankruptcies, as well as accounts that have been sent to collections, may appear on your credit report.

A credit score is a number used to predict how likely you are to repay borrowed money on time. Credit scores are generally calculated using information from your credit reports, such as your payment history, outstanding debt, types of credit accounts, length of credit history, and recent credit activity.

You may have more than one credit score. Different lenders and scoring models may use different information or formulas, so the score you see may differ from the one used for a mortgage. Most credit scores range from 300 to 850, with higher scores generally indicating lower credit risk.

Because information in your credit reports can affect your credit scores, it's a good idea to review your reports for accuracy and dispute any errors you find. You can review your credit reports from Equifax, Experian, and TransUnion online for free each week through AnnualCreditReport.com. Checking your own credit report does not hurt your credit score.

Lenders use credit scores to help evaluate how likely a borrower is to repay borrowed money on time. Credit scores provide a standardized way to assess credit risk based on information in a consumer’s credit report.

Credit scores may be considered when determining whether to offer credit and what loan terms or interest rate may be available. Because lenders may use different scoring models, the score used for a mortgage may differ from a score you see elsewhere.

Past credit challenges may affect your mortgage options, but they don't necessarily prevent you from qualifying for a home loan. Lenders consider several factors when reviewing a mortgage application, including your credit history, income, debts, assets, and the requirements of the loan program.

The impact of past credit issues can vary depending on the circumstances and how much time has passed. A loan officer can review your individual situation and help you understand which loan options may be available.

There is no single formula for improving a credit score, and different scoring models may weigh information differently. However, there are several habits that can help you build and maintain strong credit over time:  

• Pay your bills on time. Payment history is an important factor in credit scoring, so making payments on time can help strengthen your credit. 
• Keep credit card balances low. Using a large portion of your available credit may negatively affect your score.
• Be thoughtful about applying for new credit. Applying for several new accounts within a short period of time may affect your score.
• Maintain a positive credit history. The length of time you've successfully managed credit can factor into your score.
• Review your credit reports for errors. Incorrect information can affect your credit, so regularly review your reports and dispute any errors you find.

Improving your credit generally takes time. Consistently managing your accounts responsibly can help strengthen your credit history over the long term.

If your credit application is denied or you receive less favorable terms than you expected, review the information provided by the lender. You may receive an adverse action notice explaining the principal reasons for the decision or informing you of your right to request those reasons.

If the decision was based on information in your credit report, the notice should identify the credit reporting company that provided the report. You may request a free copy of that report within 60 days of receiving the notice. Review your report carefully and dispute any information you believe is inaccurate or incomplete.

Understanding the reasons behind a credit decision can help you identify what may need attention before applying for credit again.

The Fair Credit Reporting Act (FCRA) is a federal law that helps protect the accuracy, fairness, and privacy of information in consumer reports, including credit reports.

Under the FCRA, you have important rights related to your credit information, including:

• Access to your credit report. You have the right to request and review the information in your credit report.
• The right to dispute errors. If you believe information in your report is inaccurate or incomplete, you can dispute it with the credit reporting company and the company that provided the information.
• Rights following an adverse credit decision. If a decision to deny credit or take another adverse action is based on your credit report, you have the right to know which credit reporting company provided the report and may request a free copy of that report within 60 days.
• The right to address unresolved disputes. If a dispute is not resolved to your satisfaction, you generally have the right to add a statement explaining the dispute to your credit file

  For more information about your rights under the Fair Credit Reporting Act, visit the Consumer Financial Protection Bureau.