Credit Reports
Before looking for a home or even shopping for a loan, we recommend you order a free annual credit report. Look at it for information that has been reported in error or for possible identity theft related credit issues. You will want to resolve any derogatory credit issues, as much as possible, before applying for a home loan. Additionally, if you have deferred loans that do not report a minimum monthly payment on the credit report, be sure you have documentation ready to support what minimum payment will be paid eventually. Contact an IPM representative with your credit report questions. While the free report does not have credit scores on it, it is important for you to know that credit scores do affect the rate and fees you will eventually receive. For the best possible rate and lowest fees, your mid credit score (of three) should be 760 plus or if Jumbo financing is needed, then 800.
FICO scores are determined as follows: payment history is 35%, prompt is best; amount owed counts for 30%, less / paid in full monthly is best. Length of credit history is 15%, longer is better. Credit mix is 10%, varied debt types are superior to one type. Lastly, new credit counts for 10% and applications lower your score. 200 million consumers have a FICO score, just under 3 million have a perfect 850.
Regarding charge offs. If your credit report reflects a charge off, you will need to request the 1099-c from the original lender that charged off the account. With that, your balance on the credit report will be changed to 0 balance and not negatively impact your credit score, where as paying it off will lower your credit score and start the clock at another 7 years that it will be reported.
For more information on improving your credit scores visit: https://www.myfico.com/credit-education/improve-your-credit-score
A final word on credit reports
The funding lender will pull a new credit report on you prior to funding your loan. Please do not apply for any new credit between the time you apply for a home loan and close/fund the new loan, as any additional new payments may have a negative impact on qualifying for your home loan.
