Your credit score means everything in the mortgage lending world.

Credit Reports show that close to one in four Americans have never checked their credit report. Never? Are you kidding me?  This report contains important information about a person’s credit history and ability to be financially responsible, including credit cards (revolving debt history), mortgages, and auto loans. This information is used to determine not only a person’s overall credit score, but also his or her level of financial responsibility.

opens in a new windowYour credit score influences the credit that’s available to you and the terms and rate lenders can offer. It’s a critical part of your credit health! Lenders want to know what risk they’d be taking by lending you money.

According to the opens in a new windowFederal Trade Commission, nearly 20% of credit reports contain errors, so the fact that so many people neglect to check their reports is troubling. Financial experts suggest that consumers check their credit report at least once per year. Some consumers have reported that a creditor reported a debt as delinquent even though they had never even missed a payment. The fact is that inaccuracies in credit reports need to be handled immediately in order to prevent unnecessary drops in credit score and the difficulties and hassles that follow.

Putting your head in the sand and pretending it will go away is not the answer.

It won’t fix itself – you’ll need to take action! Many institutions beyond just banks use credit reports as a gauge of responsible behavior; for example, landlords frequently check a potential tenant’s credit before leasing. Many employers have started running credit checks before hiring job applicants. Even insurance agents run a credit check prior to quoting you for auto and homeowner’s insurance.

Thankfully, the government (did I really just say that?) passed the opens in a new windowFair Credit Reporting Act. It’s a law that allows you to pull your credit report from all three credit bureaus at least once a year without having to pay a dime.

One of the most important reasons for monitoring your credit is that you will be ready and able to qualify for a home mortgage. Purchasing a home is a great investment – possibly the greatest investment you can make for your future. It’s also one of the most difficult to achieve if you don’t have good credit. Maintaining and monitoring your credit score now will make it much easier to get a mortgage in the future. The fact of the matter is this: the higher the credit score, the better the interest rate. Remember that it will end up costing you more in the long run to have a low credit score because of the risk you pose to lenders.

Don’t be the one out of four that would rather just deal with a low score. Pull your credit annually and work to improve it regularly!

Naomi Mayne

Processing Manager

Box Home Loans