A Credit Profile refers to a consumer credit file, which is made up of various consumer credit reporting agencies. It is a picture of how you paid back the companies you have borrowed money from or how you have met other financial obligations. There are five categories of information on a credit profile:
- Identifying Information
- Employment Information
- Credit Information
- Public Record Information
- NOT included on your credit profile is race, religion, health, driving record, criminal record, political preference, or income.
If you have had credit problems, be prepared to discuss them honestly with a mortgage professional who will assist you in writing your “Letter of Explanation.” Knowledgeable mortgage professionals know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had problems that have been corrected (re-establishment of credit) and your payments have been on time for a year or more, your credit may be considered satisfactory.
Credit scoring is a statistical method of assessing the credit risk of a mortgage application. The score looks at the following items: past delinquencies, derogatory payment behavior, current debt levels, length of credit history, types of credit and number of inquires.
Borrowers with scores 740+ are considered the top tier borrowers and get the best rates provided. There are layers and tiers of adjustments for scores below that and depending on the loan program there can be rate and or fee adjustments for those lower scores. As a part of the prequalifying process you will be shown how those adjustments affect you when we send you the quotes for the loans you are eligible.
There are ways to get your scores up if they are below the guidelines. We have a strong company belief in helping our clients even if they don’t qualify at this point and time to fully prepare them and help them improve their credit and get their scores where they can buy in the future.
The following items are some of the ways that you can improve your credit score:
- Pay your bills on time.
- Keep Balances low on credit cards.
- Limit your credit accounts to what you really need. Accounts that are no longer needed should be formally cancelled since zero balance accounts can still count against you.
- Check that your credit report information is accurate.
- Be conservative in applying for credit and make sure that your credit is only checked when necessary.