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Cardoza Law Corporation

Fix Your Credit Reports Before Applying for a Mortgage

Mortgage Application and Paperwork With Keys The Cardoza Law CorporationBuying a house is an exciting process, but one that can be very stressful as well. Finding just the right home in just the right neighborhood is challenging, and when you’re bound by a limited budget and worried about being approved for a mortgage, the challenge is even greater. Before you even start house hunting, I recommend that you take a careful look at your credit reports and make sure they are as clean and accurate as they can be. There are lots of reasons you could be denied a mortgage for your dream house, but if the reason is a credit score or credit report that could have been corrected before you applied, that denial may have been totally unnecessary.

Why You Should Review Your Credit Report

Why do mortgage lenders look at your credit report? Because they want to see what kind of borrower you are. Do you already owe a lot of money? Are you actively using a large portion of your available credit? Do you make payments on time? A lender will answer these questions by reviewing your credit report, so it’s important that you review it before they do—way before they do! You might think you’re in good shape, but if there are negative entries on your credit report, there could be serious consequences for your home-buying dream. While there’s not much you can do about truly bad credit, reviewing your credit report will tell you whether there are harmful errors or accounts opened in your name by identity thieves. These things can be fixed, but you’ll need a few months to do it.

What to Look for When Reviewing Your Credit Reports

If you are in a position to be buying a house, you should already know that there are three credit reporting agencies (CRAs) that track your financial habits and calculate your credit score, a number that will play a vital role in whether you are approved for a home loan or not. You will need to request a copy of your credit report from each of the three CRAs—Experian, Equifax, and TransUnion. When you get them, here’s the harmful information you’re looking for:

Anything that’s inaccurate.

This could be the spelling of your middle name, a previous address you don’t recognize, or credit cards you canceled that are still listed as active. While these kinds of things may not affect your credit rating now, they could leave you open to mixed-up files or false late payments in the future.

Evidence of identity theft.

Obviously, if you see active credit cards or loans in your name that are not yours, this could mean someone has stolen your identity and opened accounts—which they are not paying off—in your name. Unpaid debt and collection accounts are two of the red flags mortgage lenders are looking for when processing your application.

Old information that should have been removed. 

Yes, a bankruptcy, foreclosure, or defaulted loan or credit card is a terrible black mark on your record, but if these things are older than 7-10 years, they should not still be on your report. If they are, the CRA can be held accountable for failing to remove them.

If these kinds of entries are on your report—even if they are inaccurate—when a lender checks it, they could reject your mortgage application, or approve it but with an exorbitantly high interest rate.

What to Do About Negative Information

Under the Fair Credit Reporting Act (FCRA), the CRAs are required to respond to your request to remove inaccurate or false information from your credit report. The process can take many months, however, so it’s important that you do this well before you are actually applying for a mortgage. You will have to write a letter to each CRA outlining the errors and, if possible, supplying evidence proving that it is a mistake. Keep copies of everything you send so that you have a paper trail in case they do not reply within the required time limit.

How a Consumer Attorney May Be Able to Help

If you feel like you are getting nowhere, fill out the form on this page to get in touch with the Cardoza Law Corporation. If there’s a chance you can take legal action to get your credit report fixed and be paid damages by the CRA who failed to fix it, I’ll let you know! You don’t have to accept being ignored by a CRA when they have made a mistake.

Contact me online or call my office directly at 855.982.2400.

 

Michael F. Cardoza, Esq.
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U.S. Marine & Consumer Financial Protection Attorney dedicated to fighting debt and credit bureau harassment.