Fayette County Board of Realtors

Planning to buy a home?

Do you know your credit score?

It is important for everyone involved to understand about credit scoring and the use of

credit scoring and automated underwriting in the

home mortgage origination process.

People who are considering purchasing a home should take a look at their credit record first to

see how it might affect their ability to buy a home.

A person's credit record reflects how that person

has handled credit in the past and is currently

paying bills. Mortgage lenders use this kind of

information to see whether a person qualifies for a loan, and it

can even affect the interest rate applied to the financing.

Many lenders have begun utilizing automated underwriting and credit scoring to

electronically expedite the loan approval process. A credit score

is often obtained as part of the credit report.

A credit score is a statistical way of predicting

the likelihood that a borrower will repay a loan.

Factors include individuals' records of repaying loans

and credit card bills, any public record such as tax

liens or bankruptcies, how often loans and credit cards

are applied for, and how much is actually owed.

Those borrowers who charge up to the limit on credit cards might hurt their credit scores, and

recent applications for numerous cards, even if

unused, could also negatively affect credit scores.

Borrowers who show a pattern of managing credit

wisely, such as keeping credit balances low and paying

bills on time consistently, get positive marks.

Other things which might determine the fate of

a mortgage application include employment history, monthly debt payments versus current income,

savings patterns and amount of savings, the type

of loan, the value of the property, and the amount of

the down payment planned or equity in the home.

Until recent times, it was necessary to evaluate

all of this information manually by reviewing each piece of information separately, which was

extremely time consuming. Many lenders now use a computer-based process to automate loan

underwriting that evaluates the information easily,

objectively and often within minutes. In addition

to expediting the loan process, credit scoring

treats each applicant objectively without regard to

demographic or cultural differences, gender or

marital status.

While it isn't best to have a lot of credit cards,

it is important to use credit to establish a

willingness to pay bills and establish a credit history.

Developing a savings habit is also a good idea.

The most vital thing for potential homebuyers

to do is to pay their bills on time or, at the very least,

pay the minimum amount by the day it is due. Being consistently late is a negative mark even if the

past due amount is made up later. Those who

haven't been paying their bills on time should start doing

so now, as credit scores emphasize your most

recent payment records.

Potential home purchasers can check their

credit records to make sure they are accurate. Credit

reports are made by three private companies,

Equifax (telephone number 880-685-1111), Experian

(telephone number 880-672-7654), and Trans Union (telephone number 880-888-4213). Since

credit records can vary from one company to

another, potential purchasers might wish to contact all

three to resolve any potential problem ahead of

time. Modest fees are charged for each report, but if

credit is denied, you can obtain a free copy.

(The Fayette County Board or Realtors is one

of more than 1,800 local boards and associations

of Realtors that comprise the National Association

of Realtors. As the nation's largest trade

association NAR is "The Voice for Real Estate",

representing nearly 750,000 members involved in all aspects

of the real estate industry. The Fayette County

Board of Realtors can be contacted by calling

770-461-2401.)

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