FHA Home Loan Planning: Your Credit
This is true even if you feel you have good credit--there are issues a lender sees on many credit reports that may complicate the loan approval process. These issues may or may not interfere with your credit score numbers but they could be a factor in the lender’s decision to approve the loan, offer a certain interest rate, etc.
If the numbers aren’t the issue, some borrowers want to know what IS the issue? In some cases, there may be errors or information that should be disputed on the report because you don’t want your loan officer making decisions about your loan based on information that isn’t accurate.
The credit reporting agency TransUnion offers advice to its customers about doing this, and the advice you’ll find applies no matter which credit agency is giving it. The start of that advice? You want to know the contents of your credit reports and make sure they reflect your actual credit habits.
If you see inaccuracies in your credit reports, you’ll want to dispute those inaccuracies including details of your balances, payments, and other information. But TransUnion warns not to delay.
If you close an account or it has been closed for you? TransUnion says you cannot dispute any details on that account.
Some applicants want to pay off account balances and have the new zero balance reflected in their credit report. This can and will happen but it does not happen instantaneously or overnight. It takes time to update, sometimes 30 days or more.
And while the going advice is to not close old accounts (the age of your credit accounts is important) some borrowers do choose to close credit accounts they no longer use.
TransUnion advises that a closed account won’t fall off your credit report right away, either. Accounts with negative credit information will remain on your report for as long as seven years. Positive account information could stay on your report for as long as 10 years.
What do you need to know about credit repair ahead of your home loan aside from this advice? Here’s one very important thing to remember.
If you choose to pay a third party to help you work on your credit before you apply for an FHA purchase loan, FHA Cash-Out Refinance, or even an FHA One-Time Close construction loan, do NOT expect that third party to be able to remove accurate information from your credit report.
Even negative information. No one can remove accurate negative credit reporting information from your report that is not expired or outdated. Any third party who promises you they can do this is not being honest with you and does not have your best interests in mind.
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