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Credit Reports 101: Everything You Need To Know For Your Home-Buying Journey

September 3, 2024

What is a Credit Report?

Your credit report is like a financial report card. It’s a snapshot of how you’ve managed credit and debt over time. Like in school, this report reflects your history, including your highs and lows. It covers everything from personal info like your name and address to your credit accounts, credit inquiries, and any public records (like if you’ve had a brush with bankruptcy). Simply put, it’s a detailed summary of your financial behaviour.

How Does Your Credit Report Impact Buying a Home?

Your credit report isn’t just a piece of paper – it’s a big deal when it comes to buying a home. This report is what lenders use to judge your creditworthiness, or in other words, how reliable you are with money. It’s one of the key factors they consider when deciding whether to approve or deny your mortgage application. A solid credit report can make you shine in the eyes of lenders, while a shaky one might have you scrambling for a Plan B.

What’s Inside Your Credit Report?

A credit report is packed with crucial details:

• Personal Information: Your name, current and previous addresses, and employment details.
• Credit Accounts: All your credit cards, loans, mortgages, and even buy-now-pay-later accounts.
• Credit Inquiries: A record of every time you have inquired about a new loan, phone plan or even buy-now-pay-later facility. 
• Public Records: Any financial legal issues, like bankruptcies or tax liens.

How Can You Get Your Hands on Your Credit Report?

There are plenty of apps out there that can give you access to your credit report, but we’ve got a better option. At Connected Finance, we have full access to Equifax, a top-tier credit reporting agency. We’d recommend that you reach out to us and we can request an Equifax-provided in-depth and detailed report for you.

Tips to Improve Your Credit Report Before Buying a Home

Ready to boost your credit score before diving into the home-buying process? Here’s some tips to help you get started:

• Pay Bills On Time: It’s simple, but it works. Consistently paying your bills on time is one of the best ways to improve your score.
• Don’t Open New Credit Accounts Unnecessarily: Each new account can ding your score a bit, so avoid opening new ones unless you absolutely have to.
• Limit Credit Inquiries: Too many inquiries can make you look risky to lenders. Keep them to a minimum.

What to Do If You Spot an Error on Your Credit Report?

If you catch an error on your credit report, don’t panic. We usually refer our clients to Equifax, where you can lodge a query online. Their team will dig into the issue and get back to you with a resolution. It’s worth noting that negative information typically sticks around on your report for about two years, so it’s crucial to get any errors sorted out as soon as possible.

How Often Should You Check Your Credit Report?

We recommend giving your credit report a once-over at least once a year. However, if you’re planning on applying for a mortgage, check it about six months prior. This gives you plenty of time to address any issues. A score of 700 and above is usually considered good for buying a home, so aim to be in that range.

Final Thoughts

Your credit report is more than just numbers, it’s your gateway to homeownership. Keeping it in check and understanding what it means can make all the difference when it’s time to apply for a mortgage. And remember, we’re here to help every step of the way.