Steps to Clean Up Your Credit Report for a Mortgage

Your FICO score. It’s one of several factors lenders use to determine how responsible you are with credit. Scores are calculated using weighted factors from your credit report like payment history and credit utilization.

Early preparation is the key to improving (or maintaining) your credit score to get approved for a mortgage. Follow these tips to clean up your report for a home purchase:


Always Stay in the Know

It’s easier than ever to monitor your credit scores and reports thanks to free sites like Quizzle, Credit Karma, and Credit Sesame. Most of them offer you VantageScores and not true FICO scores which is a major gripe for consumers. But, they’re still valuable tools to keep track of your accounts at no to cost. (Remember, you’re also entitled to one free credit report per year under the Fair Credit Reporting Act.)

Do you prefer to get your information straight from FICO? One-time scores and reports at myFICO.com cost about $20 to $60 depending on the package. A few credit card companies also offer free FICO monitoring with certain products like American Express, Chase, and Discover. Check with your credit card company before spending your money.


Dispute Through Snail Mail

Credit report data is entered by regular people like you and me, so there’s room for error. Check for the correct spelling of your name and address. Review each of the account dates, balances, and any negative remarks for errors – big or small.

If you need to dispute incorrect information, fraud, or incomplete records, follow the procedures for each credit bureau, TransUnion, Equifax, and Experianto file a claim.

All three bureaus allow you to dispute online. Don’t use the online form. Send your dispute and valid proof through the mail and request a return receipt. Keep the receipt as a backup if you need to pursue litigation in the future. Send a dispute letter to the financial institution reporting the debt as well.


Know Your Rights

The Fair Credit Reporting Act (FCRA) does more than gift you one free credit report each year. It also requires credit bureaus and credit issuers to investigate every dispute (unless the dispute is frivolous).

Typically the investigation happens within 30 days. The credit bureau reaches out to the issuer for verification of the debt. The record must be removed from your credit report if the issuer returns insufficient evidence. 

The FCRA also protects you from outdated hits to your report. For the most part, all delinquency should drop off after 7 years and for bankruptcy after 10 years. You have grounds to file a dispute if your credit includes outdated negative information.


Avoid New Accounts

Lastly, hold off on applying for any new credit. New credit decreases the average age of your credit history which is one of many factors that impact your FICO score. Plus, too many new accounts or applications for credit on your report make you look riskier and more desperate to lenders.

 

Interested in learning more about your mortgage options or prequalifying for a home loan?