I want to buy a home and don’t know how to get started. Where do I begin?
The Consumer Financial Protection Bureau has a nice roadmap they’ve designed that can help guide you through the steps. You can access it by going to:
Where can I find more information on home loans from the Veterans Benefits Administration?
The VA helps service members, veterans and eligible surviving spouses become homeowners. The VA home loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan which enables the lender to provide more favorable terms. The US Department of Veterans Affairs has a VA Home Loans page on their website:
How can I get a free copy of my credit report?
You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from annualcreditreport.com, the only authorized website for free credit reports, or call 1-877-322-8228. You will need to provide your name, address, social security number, and date of birth to verify your identity.
What is a credit score?
A credit score is the result of a mathematical formula that uses the information in your credit report, such as how well you have paid your bills in the past, to help lenders and creditors assess how likely you are to pay your bills in the future.
The credit scores you get from different companies may not be the same. There are a number of reasons for that:
- There are many different formulas used to calculate credit scores. The differences in the formulas may lead to differences in your credit scores.
- Companies may produce credit scores that give results on different scales.
- Businesses don’t always report to every credit reporting agency (CRA), and even when they do, they may send their information on different days. This means that on any given day, the information that one CRA has may differ from the credit activity being reported to another CRA.
Businesses use credit scores to estimate how likely you are to pay back loans or services. People with higher credit scores may be more likely to pay back their debts. People with lower credit scores may be less likely to pay their debts.
The Consumer Financial Protection Bureau’s website has additional information on credit scores.
What is a credit report?
Your credit report is a record of your credit activity and credit history. It includes the names of companies that have extended you credit and/or loans, as well as the credit limits and loan amounts. Your payment history is also part of this record. If you have delinquent accounts, bankruptcies, foreclosures or lawsuits, these can also be found in your credit report.
How does information get on my credit report and is it updated on a regular basis?
Every month, lenders submit updates on your credit profile to at least one of the three credit reporting companies—TransUnion, Equifax and Experian. Since lenders do not necessarily report to all three companies, the information on your credit reports may vary. It is also true that lenders report at different times of the month, a factor that might contribute to slight differences in your reports, and therefore your credit scores, at any given time.
How long does negative information stay on my credit report?
Typically, the negative information on your credit report tends to fall off after seven years, or 10 if you’ve been through bankruptcy. Positive information remains on your report for an average of 10 years from the day its corresponding account is closed. This information applies to accounts like mortgages and car loans, which have fixed terms on the number of years for repayment. For revolving accounts, such as credit cards, your positive history will stay on your report for as long as the account is active.
What factors go into my credit score?
Fair Isaac Corp., the maker of the FICO® Score, says the following factors matter most in its score calculations:
- Payment history. Paying bills on time helps your credit score. That’s the single biggest factor, accounting for as much as 35% of your FICO® Score.
- Credit usage rate. Experts recommend using no more than 30% of your total credit card borrowing limit to avoid lowering credit scores. Credit usage, also known as your credit utilization rate, is responsible for about 30% of your FICO® Score.
- Length of credit history. FICO® Scores tend to increase over time. New credit users can’t speed that up, but establishing a record of timely payments will help build scores as credit history stretches out. Length of credit history accounts for up to 15% of your FICO® Score.
- Total debt and credit. Credit scores reflect your total outstanding debt and the types of credit you use. The FICO® Score tends to favor a variety of loan types, including both installment credit (loans with fixed monthly payments) and revolving credit (like credit cards, with variable payments and the ability to carry a balance). Credit mix can influence up to 10% of your FICO® Score.
- Recent applications. Applying for a loan or credit card triggers a process known as a hard inquiry, in which the lender requests your credit score for use in its lending decision. Hard inquiries typically lower your credit score by a few points, but as long as you continue to pay your bills on time, scores typically rebound within a few months. (Checking your own credit is a soft inquiry and does not impact your credit score.) Recent credit applications can account for up to 10% of your FICO® Score.
- Derogatory information. Certain credit report entries can severely lower credit scores for extended periods of time, depending on the nature of the information. Because these entries are not found in all credit reports, FICO® doesn’t assign them percentage weights. The negative impact of these entries dwindles over time, but initially at least, they can outweigh all other factors and severely drive down your credit score.