Check your credit before house hunt begins --
Step 3: The fix
For starters, realize that a makeover can't alter an ugly yet accurate
credit report. "Rather than locking yourself into a mortgage
that is way too high, it's better to cool your jets and slow yourself
down, make a plan and save, save, save," says Sweet. "Many
times, a big down payment can offset some problems in your credit
to wait can seem devastating, especially when a certain house or a low interest
rate (particularly one that's been locked in) is part of the picture. Home buying
is "a huge emotional and financial decision. It's not just like applying
for a credit card and no big deal [if it doesn't work out]," Sweet reminds.
Just don't be tempted by credit-repair
services claiming that any blemish -- even a big one such as a bankruptcy
-- is erasable, Lowe cautions. While there are legitimate companies
that provide valuable services to clean up your credit -- you usually
can find them only through word of mouth -- Lowe cautions, "The
majority of what you'll find are scam artist type things."
For consumers who find
legitimate mistakes, each credit bureau -- Equifax,
Experian and TransUnion
-- posts its official dispute procedures online.
costs nothing and can be done online (considered the quickest route), or by phone
As you would expect, the
process calls for any documentation that can help in the investigation. But keep
"The last thing
you want to do is write to us and send us a bunch of documents. If we have to
read through long letters of explanation about why you weren't late or what the
story was, that just really slows down the process," Sweet says. "We
just want you and the creditor to be in agreement on the status."
The Cotliers' electric company
dispute required just two documents. "I always make fun of
Keith for hoarding his canceled checks and old bills for years
and years," Moira admits. "But it paid off. He broke open
his vault of old paper, flipped through his files, and found the
canceled check and following month's bill reflecting payment."
It all worked out in their favor
when rate lock time arrived. The rate meant the couple could afford
a bright and airy 1920s Colonial, complete with leaded glass windows
and other period detail, on a charming tree-lined New Haven street.
Luckily for consumers, there's
a 30-day limit on looking into credit disputes. If the creditor
can't verify or document the disputed item within 30 days, the credit
bureau will take it off the report, Lowe says. "If they decide
later it should be on there, it will be put back on."
But she and other experts recommend
being vigilant. Ensure that creditors are aware of the investigation
and supporting documents, that all three credit bureaus correct
the error, and that mortgage lenders who may have gotten the earlier
report receive an update.
option: rapid rescoring. A mortgage broker submits the dispute and it's taken
care of in 72 hours. Lowe says this route is best for buyers at a critical moment
with the house of their dreams. But rapid rescoring can be expensive, with typical
costs about $30 per disputed item per credit bureau. Getting a rapid rescore from
all three bureaus, for example, after having five items removed from your credit
report could cost about $450. Because it's in the broker's best interest to get
a client's loan approved, many will absorb the fee.
Step 4: The big chill
Once you know your score is where it should be and loan approval
is imminent, remaining a good loan prospect is crucial. Don't fall
into a situation like the young married couple who needed 100 percent
financing to purchase a home. Donnelly, who was working with them,
explains that lenders need a minimum credit score of 580 for this
type of loan. "All through the process, my clients had a 585
score. By the time my clients found a home, their score had dropped
to 579," he says. "I had to break the news that they would
need at least five percent down to still buy this property."
couple didn't have it and, needless to say, all parties involved were extremely
Avoiding letdowns like that is why Donnelly
recommends tracking your credit history early and keeping it as clean as possible,
especially in the six months leading up to a home purchase.
means not only paying on time but also thinking hard before shopping for new credit
cards or opening loans during that time period, Sweet says. "Most likely
a couple of inquiries won't make a difference, but if you have other risk indicators,
it could be the straw that [means a higher mortgage rate]."
One exception: Most scoring models disregard mortgage
inquiries made within the preceding 30 days, and consolidate mortgage
inquiries made within any 14-day window into one inquiry within
an entire two-year inquiry history.
don't be afraid to shop around for the best lender. Just having gone through the
process of finding out what you'll look like to them can make you more comfortable
with the next steps. "It's not just peace of mind," Sweet says. "It's
also a confidence builder in being able to negotiate and take care of your own
Melissa Ezarik is a Connecticut-based