Dallas, TX -- (SBWIRE) -- 07/16/2013 -- Credit report errors cause borrowers to pay more money to lenders as a person's credit report typically determines their interest rate for financial loans. In fact, a credit report is used to calculate the interest for auto loans, credit cards and home mortgages.
Credit Scores and Mortgage Rates
The three main credit reporting agencies are Equifax, Experian and TransUnion. Mortgage lenders use credit information compiled by the credit bureaus to determine loan eligibility and interest rates for borrowers. The credit bureaus issue a credit score from 300 to 850 for every person who borrows funds.
A lower credit score will result in higher interest rates while people with credit ratings that are 760 or higher will receive the best loan rates available. Therefore, it is imperative for borrowers to eliminate errors on their credit reports before purchasing their home to save thousands of dollars over the life of a loan.
Credit Reporting History
Lenders began keeping track of each customer's payment history in the 1920s. However, it was during the 1980s that the credit reporting business became common. Today, most lenders and even companies who are hiring workers frequently refer to a credit bureau report to gain detailed financial history for borrowers and potential employees.
Factors That Influence a Credit Score
When a lender looks into a credit score, they are likely reviewing a borrower’s FICO score, which is a financial statistical guide for lenders that the Fair Isaac Corporation developed. To determine a score, FICO compiles the information listed on a credit report. Several financial events can cause a person to have a lower score such as multiple late payments, bankruptcy or reports of over limit activity on a credit card. With most FICO scores, the borrower’s payment history is responsible for 35 percent of the total number while a person’s debt is 30 percent. Credit account duration makes up 15 percent of the score and new credit accounts are 10 percent. Miscellaneous factors are included in the final 10 percent.
Improving Your Credit Score with Credit Repair
According to the Federal Trade Commission, or FTC, an estimated 40 million Americans have at least one error on their credit report, and as a result, approximately 10 million people pay a higher interest rate than they would be paying if their credit report were accurate. When borrowers have errors on their credit report, it can take from one to three months to correct inaccuracies. Also, the standard correction system is time consuming for the consumer as it requires extensive paperwork and numerous phone calls to lenders. Therefore, potential borrowers may consider hiring a credit repair company.
Consumers will come across credit repair companies that provide various services. For instance, some companies will dispute the mistakes on a credit report while other repair agencies investigate the source of each error to remove the erroneous reports. To receive the best credit repair service, consider working through a company that can repair credit quickly such as RMCN.
Mortgage Rates and Credit Scores
A borrower’s credit score may affect the interest rates charged by mortgage lenders. For example, a borrower with a credit score of 740 or higher will qualify for the lowest rates while people who intend to buy a home must have a credit score of at least 500. The difference in a 680 and a 715 credit score could be up to 0.25% rate increase. While the number may not seem large over the life of a loan the dollars will add up so to receive the best possible interest rate for a mortgage loan, borrowers should review an official report from one of the three major credit reporting agencies to confirm the accuracy of their credit score. If the report is displaying errors, then consider contacting a credit repair company for assistance.
If you want a team of knowledgeable experts to help you in the home buying process from credit report correction/repair, financing and finding the home of your dreams contact us.
James Penny, RMCN (Credit Restoration/Repair) www.BellaCredit.com P: 972-984-5156
Trey Bolen, Willow Bend Mortgage http://WillowBendmortgage.com P: 972-588-9460
Tina Marr, The Marr Team at Keller Williams, www.MarrTeam.com, P: 214-620-0411