Wednesday, 03 June 2020

The Things That Matter The Most In Your Credit Report

Written by Posted On Monday, 04 May 2020 05:00

If you haven’t looked at your credit report in a while, it’s probably time to go ahead and pull another free one at www.annualcreditreport.com. This is a site supported by the three main credit repositories, Equifax, Experian and TransUnion and allows consumers to get a free report once per year. Consumers are encouraged to retrieve this report primarily to make sure there are no errors showing up. Unfortunately, credit reports have their fair share of mistakes. 

But it’s really not the fault of these repositories because they only report what is sent to them by merchants and businesses who issue credit. When data is forwarded to them, they include it. They’re not going to verify data on their own each time someone’s payment history is sent to them. They’ll review it when a consumer sees a mistake and informs them of the offending line item. 

For example, someone with a similar name might show up on your report and show some late payments which don’t belong to you. That’s the sort of thing to look out for. You’d be surprised about what all is included in your report. The property addresses where you’ve lived over the years will appear. So will any other names you’ve gone by. John Smith, J. Smith, John D. Smith, John David Smith…you get the idea. 

When consumers do view their report, they should look for mistakes, but they also want some assurances what’s being put out there is accurate. For those building a strong credit history, it’s important to make sure these credit agencies are reporting your timely payments.  Some of the data bits being reported are more important than others. What are they?

Surely the addresses of where you’ve lived over the past few years isn’t that important. At least to you, anyway, right? And of course, any other surnames you’ve used. If you married John Doe and you’re Jane Smith, you’ll be recorded as both Jane Smith and Jane Doe. Pretty simple. 

Paying on time is the most important factor in your credit report. So too are account balances. Someone who regularly keeps a balance at or near the allowable limit will see their scores fall. On the other hand, keeping a relatively low balance at all times improves scores.

A late payment on a credit card you’ve had for a while won’t hit your scores very hard as long as the late payment (more than 30 days past the due date) is relatively isolated. But a late payment on a mortgage will count more against you compared to a late credit card payment. A bankruptcy or a foreclosure is the most damaging to a credit report, although the damage is lessened over time. What’s more important on a credit report is what has happened over the past couple of years, not something that happened say five or six years ago. Old, bad information will be shown, just largely ignored as long as current and timely payment patterns are being reported. 

When applying for new credit, an “inquiry” will be entered into your record. An occasional inquiry for new credit won’t affect your credit but if there are multiple inquiries for new credit within a specific period, that will harm your credit. Not as much as a late payment or high balance accounts, but an impact, nonetheless. Multiple inquiries will carry more weight when there are other negative marks appearing.

In general, it all goes back to making sure payments aren’t made more than 30 days past the due date and keeping balances somewhere around one-third of credit lines. These two are the biggies. When a mortgage company reviews a credit report and credit scores, if payment history and balances are kept in check, your credit will be just fine.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending.

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country.

Reed was the former Technology Chair for the Texas Mortgage Bankers Association, Board Member and President of the Austin Mortgage Bankers Association. He is married and a father of three in Austin.

www.cdreed.com
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