Thursday, April 15, 2010

A Few Notes About Your Credit Report

As you know from previous posts, we are in the middle of a home sale and possible home purchase. In the interest of being ahead of the game, we went to our local lender today to get pre-qualified for a home loan so that when we submit an offer on a new home, the pre-qual letter will be part of the package. For those of you who have done this a time or two, you will know that lending (not just for houses but for most anything these days) revolves around your credit report. Here's some things we learned today:
  • First of all, I should have checked our credit reports prior to going in for a loan. You can do this at no charge once a year at I do this annually but it has been about a year since I checked our reports. There were some surprises on the report that I should have known about.
  • I had an "outstanding debt" of $1 for a credit card I cancelled two years ago. I am not sure how I can pay the bill in full and not get any more bills from the company and still owe $1 but I will call the credit company tomorrow and get this straightened out.
  • The hubby's sister put him on her credit card as an authorized user because a couple of her kids live in our area and sometimes she needs to get cash to them and she is wise enough not to put THEM on her card because they aren't the most financially responsible people in the world. We didn't know that even though hubby was just added as a user on this account, and isn't the account holder, the credit card and its ensuing information shows up on his credit report. Good thing she is responsible with her credit. We will, however, be getting hubby's name off of that account.
  • The report shows that about three years ago, I was late on my house payment ten months in a row (!). Because of the way I was getting paid at the time, I was paying a week late for this time period. Bad move on my part. ALWAYS pay your debts on time because it will show up on your credit report if you are sloppy or late with your payments.
  • Fortunately the local bank we use does manual underwriting so we are able to explain these situations and have the information taken into account when they decide on whether to give us a loan or not.
  • If you are self employed (like I am) it is soooo important to keep good records and file your taxes honestly. Some years ago when we got the loan for our current home, all I had to do was tell the lender that I was self employed--no stringent paper trail, very little documentation--and we got the loan. They have tightened up their requirements quite a bit since then. Fortunately, I report honestly and don't try to under report my income (which would lead the bank to think that I wouldn't be able to afford the home loan).

That's all, nothing major was found that will preclude us from getting a mortgage on a new place, but it just reemphasized the fact that when our lives are impacted by credit reports (whether we choose to use credit or not) it is a good idea to keep your credit as pristine as possible.

p.s. When the banker asked why I had paid off all of my credit cards and closed the accounts, I said "have you heard of Dave Ramsey?" She just smiled and said yes :)

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