A credit report is a detailed record of your credit history. Mortgage lenders use it to help determine how you have managed credit in the past and how much risk may be involved in lending you money.
A mortgage credit report generally includes information reported by the three major nationwide credit bureaus:
- Equifax
- Experian
- TransUnion
Your report may show:
- Credit cards
- Auto loans
- Student loans
- Mortgages and other installment loans
- Account balances and credit limits
- Payment history
- Late payments
- Collection accounts
- Certain public-record information
- Recent credit inquiries
- The age of your credit accounts
Credit Report vs. Credit Score
Your credit report contains the underlying information about your credit history.
Your credit score is a number calculated from information in that report.
Credit scores can change as the information on your credit report changes. Payment history, amounts owed, length of credit history, new credit, and the types of credit you use can all affect your score.
It is also important to understand that there are different credit-scoring models. The score you see through a credit card company, website, or consumer credit-monitoring service may not be the same score used by a mortgage lender. Learn more about what your credit score means.
Why Does a Mortgage Lender Review Your Credit Report?
Your lender uses your credit report to evaluate both your credit history and your current financial obligations.
Credit can affect:
- Whether you qualify for a particular mortgage program
- Your interest rate
- The cost of the loan
- The amount of debt that must be included when qualifying you
With some mortgage programs, a higher or lower credit score can significantly affect the interest rate or other loan costs. Learn how credit score can affect your mortgage rate.
Your Credit Report Can Change During the Mortgage Process
A credit report is a snapshot of your credit at a particular point in time.
If you open a new account, increase credit-card balances, finance a vehicle, miss a payment, or make other significant changes, your credit report and credit scores may change.
That is why it is important to be careful about making major credit changes between prequalification and closing.
If you are considering opening new credit, making a large purchase using credit, or changing your debt structure while you are buying a home, talk with your mortgage professional first.
How Long Is a Mortgage Credit Report Good For?
Mortgage credit reports are generally usable for a limited period of time.
If you were prequalified well before finding a home, your lender may need to obtain an updated credit report before closing.
An updated report means your credit profile will be reviewed again, so changes to your balances, accounts, payment history, or credit score can affect your loan.
It may also mean another Credit Report Fee.
Check Your Credit Report for Accuracy
Because lenders rely heavily on the information contained in your credit report, it is important that the information be accurate.
Reviewing your credit before applying for a mortgage can give you time to identify incorrect information, unfamiliar accounts, or other issues that may need attention.
Federal law also gives consumers rights regarding the accuracy and use of credit-reporting information.
Protect Your Credit While Buying a Home
Once you begin the mortgage process, your goal should not be to make your credit report completely motionless. Normal financial activity continues.
But major changes can matter.
Before opening a new credit account, financing a large purchase, closing an established account, or making another significant credit move, check with your mortgage professional.
A five-minute conversation before making the change can sometimes prevent a much larger problem later.