Your credit score impacts the interest rate you can get for a mortgage. If it’s low, it can impact your ability to qualify for certain types of loans. If it’s really low, you may want to sit out the market to first work on improving your score.
So is a credit score a magic number? It is really three magic numbers, each generated by one of the top credit reporting agencies. And these numbers are not the same thing as your credit reports (though you will have three of those, too). Confused?
Don’t wait until you’re meeting with a lender to learn your credit score. When you get that twinkle in your eye for homeowner status, you should immediately search online for “3 in 1 credit report with FICO score” to buy a copy of your credit report and FICO score from each of the three agencies: Transunion, Experience and Equifax. You’ll find many vendors available, so just read carefully to ensure you’re getting both the report and the score (and pay attention to whether you’re actually signing up for an ongoing monitoring service). Review each one with great attention to every detail. Address any “oops, I thought I paid that a long time ago” situations, and look for anything negative that has already been addressed but isn’t accurately reflected as being paid. Review your previous addresses, names, etc. to ensure accuracy. Don’t start closing your accounts, either. It’s a process. Pay attention and stay with it.
If you’re just thinking about buying a house but not ready to pull the trigger, go to www.annualcreditreport.com and get a free copy of the three reports without the FICO scores. This will give you a view of what’s in your credit reports and help you flag any items that need to be corrected or disputed. And you can get a ballpark score – not FICO, not useful for actually obtaining a loan – for free at www.creditkarma.com. There are many resources to educate you on improving your credit.