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Check your credit before house hunt begins

Shopping around for the best price comes naturally to most consumers. Comparing prices on, say, the latest plasma TV is mostly a matter of doing some research, hitting a few stores and sharing info with friends and family.

With home loan rates, however, that guy down the street may wind up being quoted a lower or higher percentage than you -- even for the same exact loan from the same exact lender.

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"There are different interest-rate tiers based on your credit score," explains Kurt Sorensen, a client services manager at True Credit, a division of credit bureau TransUnion. So making sure your credit score is as high as it can possibly be gives you your best shot at your lowest possible rate.

Sorenson's a good example. When purchasing his own home, Sorensen checked out his credit report first and found a few items were working against him. After clearing up some inaccurate information, he was able to boost his credit score by 40 points and qualify for the lowest interest rate available.

Loan director Thomas Donnelly of Seymour, Conn.-based Cross Country Lenders, has seen it time and time again."Good credit can virtually open every door for a prospective buyer."

Yet incorrect, incomplete or outdated information appearing on a credit report is not all that uncommon. That makes it all the more important as a first step in the home buying process, in which a higher interest rate can well be the difference between affording a home or not. Because mistakes aren't corrected overnight, experts recommend checking your credit as early as possible.

That means getting a copy of your credit report two to three months before you're ready to start looking, says Maxine Sweet, vice president of public affairs for the credit bureau Experian. "If there is anything that's a surprise, it gives you time to deal with it."

What if that time period has already passed and you're actively shopping for your dream home? Better late than never. Creditors generally have 30 days to update incorrect records. That may well be enough time to iron out any credit wrinkles.

Ready for a pre-purchase credit investigation? Here's how to do it.

Step 1: The credit check
Get a report from each credit bureau -- Equifax, TransUnion and Experian. To save time, look for services that provide all three reports instantly online. An annual free credit report will soon be available to every American but if you are not yet eligible, this is not the time to skimp; pay for a blended credit report that also provides your credit score, so "you know where you stand" in the mortgage game, Sweet says.

Products such as TransUnion's Know Your Loan Rate go a step further by using income, debt and credit report data to determine what type of mortgage rate to expect. "This gives you kind of a stepping stone -- the national average rate for someone at that credit level," says Nicole Lowe, a credit education specialist at TrueCredit.

Step 2: The accuracy scan
Examine every item listed on your credit report to ensure it's an accurate reflection of your credit history. Are debts correct and current? Do they truly belong to you and not a family member, someone at the same address or someone with the same name? Are there suspect creditor inquiries or other evidence of fraud? Did any reportedly late or missed payments truly (or at least likely) happen?

A couple of months before Moira and Keith Cotlier started looking at a Connecticut home, they checked on their credit report and saw that their electric company had reported a late payment. "It hurt our rating," says Moira, who was certain the item was a mistake.

-- Posted: May 16, 2005

'05 Real Estate Guide
30 yr fixed mtg 3.79%
15 yr fixed mtg 2.93%
5/1 jumbo ARM 3.13%
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