Understanding Your Credit Report

Before applying for a mortgage, it is worth understanding what a credit report is, what it contains, and how to review it for accuracy. Your credit report is the foundation from which your credit score is calculated, so errors or outdated information can have a real effect on your home buying process.

What Is a Credit Report

A credit report is a detailed record maintained by credit reporting agencies, often called credit bureaus, that lists your credit accounts, payment history, and other related information. Lenders use this information, along with a calculated credit score, to evaluate loan applications.

What Information It Contains

A typical credit report includes personal identifying information, a list of credit accounts such as credit cards and loans, payment history for each account, amounts owed, the length of time accounts have been open, and public record information such as bankruptcies. It may also list recent inquiries, which occur when a lender checks your credit.

How to Get Your Report

Consumers are generally entitled to obtain free copies of their credit reports from the major credit bureaus on a regular basis through official channels. It is worth reviewing reports from each bureau, since the information listed can differ slightly between them.

Why Reviewing Matters

Errors on credit reports are not uncommon, and they can range from an account that is not actually yours to an incorrect payment status on an account you do own. Because your credit score is calculated from this information, an error can unfairly lower your score and potentially affect your mortgage options.

How to Dispute an Error

If you find inaccurate information, you can generally file a dispute directly with the credit bureau reporting the error, along with any supporting documentation. The bureau is required to investigate within a set timeframe and correct or remove information found to be inaccurate. This process can take time, which is another reason to review your report well before applying for a mortgage.

Understanding Inquiries

When you apply for credit, a lender may perform what is called a hard inquiry, which can have a small, typically temporary effect on your score. Many scoring models treat multiple mortgage-related inquiries within a short window as a single inquiry, recognizing that consumers often shop around for a loan, though this varies by scoring model.

Keeping Your Report Healthy

Beyond disputing errors, general habits like paying bills on time, keeping balances low, and not closing old accounts unnecessarily help maintain a healthy credit report over time. Since your credit report underlies your credit score and plays a role in mortgage underwriting, treating it as an important financial document worth regular review is a valuable habit for any home buyer.