FICO Scores Impact Homeownership

Consumers in Houston on average have the worst credit scores in the United States.  Your FICO/Beacon or your credit score, it is the largest factor lenders use to determine if you can get a loan and at what rate. You have a separate FICO score for each of the three major credit agencies.  A common question is “why would they be different?”. They can vary by more than 100 points. Not all creditors report to all three agencies, so you will have different information for each. In many cases there is incorrect information posted on your account which negatively impacts your credit rating. A few FICO points here or there and it can mean the difference between a good interest rate or a bad one. Depending what was reported incorrectly it could mean the difference between getting a house or continuing to rent.  It can take many months to clear up a credit report for incorrectly reported items. Credit Agencies do not verify what is on your report. They are supposed to by law, but they don’t because of the time it would take to do so. They simply take the word of the creditor. Why would a creditor report inaccurate information about you? Because of the large amount of data they deal with daily mistakes are bound to happen. One type “O” in your account and it could show you were late or never paid at all. Worse someone could still your identity, a crime that is growing daily. Here are some of my recommendations to make sure you credit is in order before buying a home.

First Opt Out – Opt out of the annoying credit and insurance offers you receive in the mail. Why? Because they are damaging your credit score. Credit card and insurance companies are allowed to inquire about your credit even if you did not authorize them to do so. For every inquiry it may knock your score down by as much as 5-7 points. 5-7 points is not much unless you receive 4 a month which would result in reducing your score by about 50 points. Once you opt out insurance and credit card companies are not allowed to inquire about your credit unless you requeste them to do so.

Next Request your Free Annual Credit Report – You are now allowed to request your credit report for the three major reporting companies(Experian, Equifax, Transunion). You can print them instantly or have them mailed to you. You can find them at http://www.annualcreditreport.com/ . Be sure to print the reports if you request them on-line because some services will only allow you to view them once on-line.

Review the Reports – Look for anything that maybe incorrect, take your time it is a big report. Credit reporting agencies are required to correct any incorrect items, amounts, dates, etc. If you find something wrong dispute it with them and the company that reported it to them. Dispute it in writing with registered mail or online, but do not call. There is not documented record of a phone call.  You have to be persistent and follow up. In general their first reply with be that they verified it but you have to be persistent.

Even if you are not going to buy a house in the future, it’s important to monitor your credit. Just about everyone checks your credit these days even some employers. A bad FICO score can cost you in many ways in life.  Knowing whats on your credit is taking control away from banks and putting you in control of your financial future. Below are some good websites to help you.

Credit Monitoring – www.truecredit.com

Personal Finance Website – www.bankrate.com