Here Comes Your Credit!
Being approved for a mortgage is a great thing. Preparing your finances to get approved is another. On their end, mortgage lenders need to make sure that every borrower is a good credit risk. This means that the mortgage lender needs to be convinced that the borrower will pay back their mortgage on time and in full. But how do mortgage lenders determine that? While there are a number of factors involved, mortgage lenders, as well as other types of lenders, use details in your credit report as part of their assessment.
Tell Me About Credit Reporting
Your credit report is a document that contains details about your financial life. Your credit cards, your car loans, your work history, even your previous mailing addresses – all that, and more, is contained in your credit report. So it makes sense that you would want to take a peek at your credit report to make sure it is correct. You wouldn’t to be denied a car loan or mortgage due to mistakes in your credit report.
Who Records This Information?
The groups who collect and record your financial information are known as credit reporting agencies. The three major agencies – Equifax, Experian, and TransUnion – use the details in your credit report to calculate your credit rating, which is a number that indicates your level of credit risk. The higher the number, the better the risk, and that also means better terms for you. Because each credit reporting agency uses a secret formula to come up with your credit rating, your score will differ from agency to agency, although they will be quite close.
The three credit reporting agencies are going to implement a large change in the way they report their credit data. As with any change, it can help the scores of some consumers while at the same time, possibly create some problems for lenders.
What do they propose to do?
Many liens and most judgments don’t include the required information. If records don’t contain these details, then they will be removed from the consumer’s record, and any new data that does not have these points will not be added. This is great for consumers whose tax lien or civil judgments could have been impacting their credit report negatively.
The reason for these changes is to improve and formalize the standard for recording and reporting consumer data for everyone involved, including consumers and businesses.
This change, which takes effect on July 1 2017, will be great for consumers. Not only will it remove negative information from their credit rating which could be affecting their ability to get loans or loans with decent terms, it could also have the additional perk of raising their credit scores. According to FICO, a credit scoring entity, this could improve almost 12 million credit scores, which is about 6% of consumers who have credit scores. However, FICO also says that scores could increase only by a modest 20 points.
What’s more, in the future, credit reporting agencies could be required to remove other categories of information, such as library fines or late gym membership fees, as well as change the timing of medical collections information.
What affects consumers in regards to loans must also affect lenders. Removing such information could negatively affect the ability of a lender to determine accurately a client’s ability to pay back a loan. No one wants clients to default on a loan if they don’t have to.
Shamrock is in Your Financial Favor
If you want professional advice about your credit rating, Shamrock is here to help. With decades of experience under their belt, they have seen just about every situation. They can offer advice to help you increase your credit score, guide you through details of your credit report, and make sure you get the mortgage that you can afford.