Real Estate Term of the Day: Credit History, Credit Bureau & FICO Scores

Real Estate Term of the Day: Credit History, Credit Bureau & FICO Scores

CREDIT HISTORY – an individual’s past behavior regarding the taking out and repayment of loans and the use of revolving credit, such as credit cards.  Credit histories are recorded by a small number of national credit reporting companies who issue credit reports.  These reports are used by lenders to assess an applicant’s creditworthiness (Barron’s Dictionary of Real Estate Terms)

CREDIT BUREAU – an organization that provides information regarding the creditworthiness of a prospective borrower.  (Barron’s Dictionary of Real Estate Terms)

The three major national credit bureaus are:

Equifax – www.equifax.com

Experian – www.experian.com

Trans Union – www.transunion.com

These credit bureaus will collect credit histories from a borrower’s creditors and use that information to determine the borrower’s FICO scores.

FICO SCORES – a measure of borrower credit risk commonly used by mortgage underwriters when originating loans on homes.  The score is based on the applicant’s credit history and the frequency with which they use credit.  Expressed as a number between 300 and 850, the score determines not only whiter the loan is approved but also what type of terms the lender is offering (Barron’s Dictionary of Real Estate Terms)

It is always a good idea to review a copy of your credit report annually.  By doing this, you can correct any errors on your credit profile in advance of a purchase, establish credit if necessary, or start repairing your credit if you have had problems in the past.  Lenders look very carefully at your credit as an indicator of your willingness to repay your loan.  Having poor credit, little or no established credit, or having unresolved disputes with creditors, can affect your purchasing power and your ability to get a loan.  To avoid unpleasant surprises down the road, you can request a copy of your credit reports for free by going to: www.AnnualCreditReport.com (This central site allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion).

See also: Understanding Credit


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