Are you shopping for the best refinance rates and are disappointed to find lenders aren’t offering you their advertised mortgage rates? If you’re not qualifying for today’s best refinance rates the likely culprit is you credit score. Here are six problems areas on your credit report that could be holding you back from getting the best refinance rates for your next home loan.
Credit Reports Are Flawed
It’s a great idea to stay on top of your credit reports every year for errors that could damage your credit score. After all, the interest rates you’re offered as a consumer for credit cards, car loans and mortgages are all based on your credit scores. You can get free copies of your credit reports by visiting the government-mandated website annualcreditreport.com. Once you’ve got your credit report do you know what errors to be keeping an eye out for?
According to the government four out of five credit reports has damaging inaccurate information. Here are the six problems you want to be sure aren’t keeping you from today’s best refinance rates.
- Closed Accounts Can Hurt You
- Outdated or Incorrect Information
- Equifax Online Dispute:
- TransUnion Online Dispute:
- Experian Online Dispute:
- Bogus Accounts & Identity Theft
- Duplicate Charge Or Collection Accounts
- Ongoing Billing Disputes
- Fallout From a Divorce Can Wreck Your Credit
Closed accounts on your credit aren’t necessarily a bad thing, but it depends on who closed them. If you have accounts like department store credit cards that you paid off and closed but they’re listed on your credit report as “closed by grantor” this could be damaging your credit score.
Closed by grantor means the lender decided to close the account which reflects negatively on you. Make sure that all closed accounts indicate that you closed them voluntarily if this is the case.
Negative information drops out of your credit reports after seven years. The exception is if you’ve had a bankruptcy. Those stick around for ten years. Even if you have unpaid collection accounts those will go away after seven years. The good news is that nothing is permanent and time heals everything, including your credit reports.
With that being said make sure blemishes from your past aren’t still being reported after seven years. If you find outdated information you can file a dispute on each credit bureau’s website using the following links:
https://www.ai.equifax.com/CreditInvestigation/
http://www.transunion.com/personal-credit/
It’s not uncommon to find accounts that aren’t yours listed on your credit reports. This doesn’t automatically mean you’re a victim of identity theft. It’s possible someone else opened the account in your name or it could simply be an error that was mistakenly listed on your credit history.
Creditors often confuse individuals with similar names or social security numbers due to careless record keeping and reporting.
Regardless of how the incorrect information found its way into your credit report you need to get it fixed fast. You’re not legally responsible for fraudulent accounts they can still deep six your credit score and prevent you from getting the best refinance rates.
If you are a victim of identity theft you’ll want to report it to the Federal Trade Commission online at FTC.gov or by calling the Identity Theft Hotline at 1-877-ID-THEFT (1-877-438-4338). After you file an identity theft complaint with the FTC you’ll want to dispute the fraudulent accounts with each of the credit bureaus using the links listed above.
Sometimes you’ll find credit accounts that have been double reported on your credit history. This means the creditor is listed twice. Having one account listed as two can negatively impact your debt-to-income ratio, dragging down your credit score.
In addition to credit card accounts this commonly happens with collection accounts that have been sold off to different agencies. You could find a debt reported by the original lender and any number of collection companies that have had your account. The duplicate listing magnifies the negative affect on your credit score.
If you’ve ever disputed a billing error that resulted in late or missing payments this information could wind up in your credit report.
It’s not common for lenders to report negative information quickly, even when they’re in the wrong. This information can be devastating to your credit score until the creditor fixes their mistake. You should save any written correspondence from the lender in case you need to document the lenders error when filing a dispute with a credit bureau.
Financial difficulties is a common reason for divorce and walking away from a couple’s debt can stick with you for seven years. There’s not a lot you can do with any leftover negative information that came when you were married. If your divorce came with a bankruptcy you’ll be stuck with that for an additional three years.
Make sure that you’ve removed your name from any joint accounts as soon as divorce is final, and comply with the terms set by the court in your divorce decree. Your divorce decree could be a useful tool for removing negative information from your credit reports after the divorce so make sure your attorney is covering all the bases when it comes to the financial aspect of your divorce.
Dispute Any & All Inaccurate Information
If you find any inaccurate information in your credit report, no matter how insignificant, make sure you file a dispute. All three credit agencies (Equifax, Experian, and Trans Union) have online disputes that simplify the process of disputing incorrect information in your credit file.
Even something as insignificant as an incorrect address or an outdated employer could lead to problems down the road.
When you file disputes that require documentation make sure you’re sending in copies. Never send original documents to any creditor or agency. One thing you can always count on is people will screw up reporting and lose your documentation.
If you’re a member of a credit union you might have access to low-cost credit monitoring services. If you’d rather not pay to stay on top of your credit reports you are entitled to one free copy of your credit reports per year at the Annual Credit Report website. This will get you your credit reports but if you’re interested in a credit score you’ll have to pay to get one.
When monitoring your credit score make sure it’s your FICO score and not some other scoring. You can get a FICO score from myfico.com or from Equifax or Transunion. Experian offers their own scoring at this time and is not the FICO score used by mortgage lenders.
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You can learn more about getting the lowest refinance rates from today’s best mortgage lenders without paying unnecessary fees by checking out my free Underground Mortgage Videos.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
