When applying for a home loan, the last thing you need are surprises.  That's why anyone who is considering buying a home should obtain, and if necessary correct, their personal credit report.

Understandably, a mortgage lender wants to know your track record of paying debt.  To find out, the loan officer will order a mortgage credit report from a bureau that collects information from retailers, banks, finance companies, mortgage lenders and other public sources on all consumers who use any type of credit.

You have the right to inspect a summary of your credit report, challenge any inaccuracies and request that the credit agencies make corrections.

Boost Your Credit Scores and Save a Fortune

The FICO® score is based on your past use of credit.  A score above 700 helps you get the best rates.  You can find out your score at My FICO for a small fee of $14.95.  Recent surveys show that 80% of credit reports contain mistakes.  So, be sure it is accurate.  Order a free annual copy from each of the three reporting agencies.  You can go to Annual Credit Report or call 1.877.322.8228.

Here are some way to improve your FICO® scores:

1. Pay bills on time.  Payment history is the single most important factor in a credit score. 
2. Ignore any offers to skip payment on your credit card bills - interest rates just keep accruing on your unpaid balance.
3. Reduce your credit card balances.  The closer you are on your credit limit, the worse your score.  Try to keep your balances below 30% of your available credit.
4. Do not close unused lines of credit before applying for a mortgage.  It will have a negative short-term impact on your credit score.
5. Limit your credit applications.  Too many credit inquiries can lower your score.  But FICO® counts credit inquiries by different car or mortgage lenders in any 45-day period as just one credit check, so you are not penalized for comparison shopping.
6. Build a track record.  Recent graduates should establish history with a single credit card or gasoline company card before applying for a car loan or mortgage.

Here is a sampling for the cost of a $200,000 30-year fixed rate mortgage charged on August 5th of this year*:

Score	APR	Monthly Payment	Total Interest paid over 30 years
720-850	5.793%	$1173	$222,141
700-719	5.918%	$1189	$227,888
675-699	6.456%	$1258	$253,008
620-674	7.606%	$1413	$308,671
560-619	8.531%	$1542	$355,200
500-559	9.289%	$1651	$394,364

Do you pay your rent, telephone, and other utilities on time and can't understand why your credit scores may be low?  The problem is that no one is asking your landlord or utility company if those bills are paid on time.  Now there's hope for you.  A new credit reporting agency, PRBC (Payment Reporting Builds Credit - PRBC ) is teaming up with the three big agencies to collect and update "non-traditional" credit history information not normally reported to the large agencies.  PRBC collects data such as rent payment history, and everything from alimony and child-support payments to payday loans, telephone bills, gas and electric charges, among others.  These bill paying scores can be used to supplement or enhance the traditional FICO® credit scores.  And increasing credit scores will most likely give you better interest rates and better home buying power.

An experienced lender will help you understand your credit report and its rating.  If your credit score is low, that lender can work with you to help you improve your credit scores.

You can purchase a special consumer version of your report by contacting one of the major credit bureaus covering your area.  1) Equifax at 800.685.1111; 2) Experian at 800.682.7654; 3) Trans Union at 616.690.4909.  Upon receiving your credit report, carefully review the explanation of codes used to rate your payment history for each account and scrutinize each entry.  Credit bureaus, which handle millions of consumer records, are notorious for including erroneous information.  The good news is that they are required by law to promptly substantiate or correct any discrepancies.

If you discover any errors in your report, immediately follow the bureaus procedures to correct them.  If your credit report still has a negative tone or contains a series of late payments that may have occurred due to extenuating circumstances, you have the right to submit an explanatory statement that can be made part of your permanent record.

It is important that prospective lenders know that you care about your credit history.

*Source: Parade Magazine, October 2, 2005