Credit Reports

You are probably familiar with credit scoring and credit scores (Also referred to as a FICO score representing the company that developed credit scoring systems; Fair, Isaac & Company, Inc.)

But, what exactly is a credit score and how will it affect your ability to obtain a home loan? We will define credit scoring, clear up any confusion, and dispel any myths you may have heard.

When you apply for a home mortgage, we will review your credit history when we access your credit report. Your credit report includes past and current credit usage, as well as payment performance. In addition to your credit information, your credit report will include four other categories of information:

  • Identifying Information
  • Employment Information
  • Public Record Information
  • Inquiries

NOT included in your credit report is race, religion, health, driving record, criminal record, political preference, or income.

So, what is a credit score? Simply stated, it is an individual's credit record distilled into a three-digit number, roughly between 350 and 850. The higher the number, the less of a risk that person is in handling credit in the eyes of the lending industry. Credit scores are based on five factors: 35% of the score is based on payment history, 30% on the amount owed, 15% on how long you have had credit, 10% percent on new credit being sought, and 10% on the types of credit.

If you have had credit issues, be prepared to discuss them honestly with us and we will assist you in addressing the items of concern. We know there are legitimate reasons for credit challenges, such as unemployment, illness, or other financial difficulties. If you had problems that have been corrected (reestablishment of credit), and your payments have been on time for a year or more, your credit may be considered satisfactory.

The following list contains steps that you can take to improve your credit score:

  • Pay your bills on time.
  • Keep balances low on credit cards.
  • Limit your credit accounts to what you really need. Accounts that are no longer needed should be formally closed.
  • Check that your credit report information is accurate.
  • Be conservative in applying for credit and make sure that your credit is only checked when necessary.

All things being equal, when you have derogatory credit, all of the other aspects of the loan need to be in order. Down payment, employment stability, and income all play a larger role in the approval decision.

At PHH Home Loans, we offer a variety of lending products to meet the varied needs of each of our customers. Many borrowers mistakenly assume that bruised credit will keep them from getting a loan. However, we recognize that you are more than your credit rating. We have solutions that take other factors into account and give you the opportunity to achieve your homeownership dream.

Click here to begin the application process, or click here to contact us and discuss your situation.


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