How do I establish my credit?
Paying your debts when due establishes credit. When you pay your bills and the amount of time (number of months) it takes to cancel an account or a credit card charge determines your good or bad credit. All this information is recorded in a credit report.
How do I get my credit report?
You can request a copy of your credit report at any of the credit bureaus that operate in the area where you live. They appear in the yellow pages of the phone book, in the Credit Bureaus section. Some charge for the copy, but many provide one free copy of your credit report a year.
Why are lenders interested in my credit report?
Lenders consider that your past behavior with respect to paying your bills is indicative of future behavior that can be expected from you.
When you apply for a home loan, the lender will request a credit report to verify your current debts and determine your good behavior in paying your previous debts.
What if my credit report is not perfect?
Your credit history does not need to be flawless, however, it must clearly indicate your willingness to pay your debts. If you have had problems in the past, the most recent records showing that you are up to date with your payments tell lenders that you have taken corrective action. But if you have problems with outstanding credits, the lender may determine that you are not ready to buy a home until those problems are resolved.
NOTE : When you receive your credit report, read it carefully. Credit reports may be inaccurate, or they may misrepresent credit problems that you have had in the past but have already resolved.
How should you resolve credit issues?
The ideal is to have an impeccable credit history, but if you have had problems in the past, you should rectify them before beginning the process of buying a home.
If you ever owned a home but suffered from foreclosure, your credit report will show the foreclosure and the lender will want to know why.
Your credit report will also indicate whether you have filed for bankruptcy. Again, the lender will want you to explain the circumstances of the bankruptcy.
If you’ve had bad credit in the past, lenders will want to see that you’ve rebuilt your credit and are able to manage your debt.
Written letters with a detailed explanation of any post-due payments are required; These letters may be the primary reason a lender uses to approve a loan that would otherwise be rejected. Make sure the letter highlights the steps taken to solve the problem.
If you don’t have credit cards or have never borrowed from a bank, you’ll need to rebuild a non-traditional credit history. The lender is required to document that you paid your rent monthly to your previous landlords, as well as your payment history to utility companies and insurers. Remember: lenders want to see a history showing payment when your debts are due.