What Should I Look For On My Credit Report That Affects A Mortgage?

Basics

Your credit report lists your credit lines and payment history for the past several years.

If there are errors on your credit report you should take care of them before you look for a mortgage.

Purchasing your credit report should usually cost you less than $50, and often a lot less than this.

Derogatory Credit Items

Your credit report breaks your credit lines down into three different areas:

open credit lines
closed credit lines
derogatory credit lines
The open credit lines are ones that you currently have that have no problems in their payment history.

A closed credit line is one that has been closed at either party's request.

A derogatory credit line is one where there are late payments.

Late payments are listed as being late by 30 days, 60 days, 90 days, or more.

The credit report will also list each month and year in which a late payment happened, and by how late the payment was. For example, there may be a listing of a June 2005 late payment by 60 days, and a January 2006 late payment by 30 days.

Late payments will tend to reduce your credit history. Occasional lates by 30 days may be understandable by mortgage lenders. This can just be because someone forgot to pay a bill.

A repeated pattern of late payments is more serious.

If you find errors on your credit report you will need to gather documentation to prove this is incorrect and work directly with the creditor to resolve this. When you have a written resolution of this you can submit this to credit bureaus to clean up your credit.

You may see creditors on your credit report that you don't recognize. This is often because your debt has been sold to a collections agency.

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