When you apply for a mortgage, your credit report is one of the first things a lender reviews. It helps determine whether you qualify and can influence the terms you are offered. Looking at your own report well before you apply gives you time to understand it and correct anything that is wrong.
What is in a credit report
A credit report is a record of how you have used credit. It is maintained by credit bureaus, and the three nationwide bureaus each keep their own version. Reports generally include:
- Personal information: your name, addresses and sometimes employers.
- Accounts: credit cards, auto loans, student loans and other debts, with balances and payment history.
- Inquiries: a list of who has requested your report.
- Public records and collections: certain items like accounts sent to collections.
Your credit score is a number calculated from the information in your report. The report itself is the underlying detail, and that is where errors can hide.
How to get your reports
You can request free credit reports from each of the three nationwide bureaus through AnnualCreditReport.com, the site authorized by federal law for this purpose. Be cautious of look-alike sites. Pull all three, since information can differ from one bureau to another.
What to look for
Read each report slowly. Check that your name and addresses are correct. Look at every account and ask whether you recognize it. Confirm that payments you made on time are shown that way, and that accounts you closed are listed as closed. Accounts you do not recognize can be a sign of identity theft and deserve prompt attention.
Also notice the general patterns a lender might see: how much of your available credit you are using, how long your accounts have been open, and whether there are recent late payments.
Disputing errors
If you find a mistake, you can dispute it directly with the credit bureau reporting it, and often with the company that supplied the information. Explain the error clearly and include copies of any supporting documents. The Consumer Financial Protection Bureau offers guidance on the dispute process at ConsumerFinance.gov. Disputes take time to resolve, which is why reviewing your report months ahead is so helpful.
Habits that support healthy credit
Paying every bill on time is one of the most important things you can do. Keeping credit card balances low relative to their limits can also help. Many buyers choose to avoid opening new accounts in the months before applying for a mortgage, since new inquiries and accounts can affect a report.
Credit situations vary, and there is no one-size-fits-all fix. A lender or a reputable nonprofit credit counselor can review your specific situation and talk through options. When your credit and savings are in a good place, reach out through our contact page and we can help you plan your home search.
Putting It Into Practice: A Six-Month Credit Timeline
Reviewing your credit well before you apply gives you time to make changes and see results. Here is a general timeline many buyers find helpful.
Six months or more before applying
- Pull your reports from all three nationwide bureaus and read every page.
- Dispute any errors in writing and keep copies of everything you send.
- Set up automatic payments or reminders so no bill is ever late.
- Make a plan to pay down revolving balances, starting with the highest-interest cards.
Three months before applying
- Check your reports again to confirm disputes were resolved.
- Continue lowering credit card balances relative to their limits.
- Avoid applying for new credit, including store cards offered at checkout.
- Gather any paperwork that explains past issues, such as a resolved collection account.
One month before applying
- Take one more look at your reports for anything new or unexpected.
- Keep balances steady and keep paying on time.
- Write a short explanation for anything a lender might ask about, like a late payment during a job change.
Common Credit Mistakes Before a Mortgage
- Closing old accounts. Long-standing accounts can contribute to the length of your credit history. Closing them may also reduce your available credit. Ask a lender or credit counselor before closing anything.
- Paying a collection without understanding the impact. How a collection is handled can affect your report in different ways. A lender or nonprofit credit counselor can help you decide on the best approach.
- Co-signing for someone else. A co-signed loan can show up as your debt and affect how much you qualify for.
- Running up balances before closing. Lenders may check your credit again before closing. New debt or higher balances can change your approval.
- Using credit repair services that promise quick fixes. Be cautious of any company that guarantees to remove accurate information or asks for large fees up front. You can dispute errors yourself for free.
What Lenders See That You Might Not Expect
When a lender reviews your credit, they are not just looking at the score. They are also looking at the story your report tells. A few details can stand out:
- Recent inquiries: Several new credit applications in a short time can prompt questions.
- Payment patterns: A single late payment years ago may matter less than recent late payments.
- Utilization: How much of your available credit you use can matter, even if you pay balances in full each month, because of when balances are reported.
- Mixed files: Occasionally, information from someone with a similar name can appear on a report. This is one of the most important errors to catch.
Questions Readers Ask
Will checking my own credit lower my score?
Checking your own credit reports is generally considered a soft inquiry and does not affect your score.
Do I need perfect credit to buy a home?
No. Different loan programs have different requirements, and many buyers purchase homes without perfect credit. A lender can tell you what options may fit your situation.
What if I have no credit history?
Some lenders can consider alternative records, such as rent and utility payment history. Ask lenders whether they offer that kind of review.
Should I freeze my credit while I am house hunting?
A freeze can protect against identity theft, but you will need to lift it temporarily when a lender needs to pull your report. Plan ahead so it does not slow down your application.
Your credit situation is unique, so a lender or reputable nonprofit credit counselor is the best resource for advice on your specific report.
