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Seeking a Bad Credit Mortgage, Home Refinancing, or Home Equity Loan? Know Your Credit Score

By Barbara Marquand
Mortgage Credit Problems Columnist


Shopping for a loan without knowing your credit score or what's in your credit reports is kind of like applying to colleges without knowing your grade point average and test scores.

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Basically you're flying blind, and without self-knowledge it's tough to plan. Here are five reasons you should review your credit reports and know your credit score before you apply for loans, whether you're looking for a bad credit mortgage, home equity loan, or mortgage refinance.

1. Catch Mistakes.

You can get free copies of your credit reports annually from each of the three credit reporting bureaus through AnnualCreditReport.com. Mistakes in credit reports are surprisingly common, and they're fairly easy to fix. Each of the three credit reporting bureaus, Transunion, Equifax, and Experian, provide instructions on their Web sites on how to correct errors. (These are factual errors, not money mistakes you made). Sometimes fixing even one error can increase your credit score.

2. Get Accurate Mortgage Quotes

Lenders offer different rates to people depending on their credit histories. People with perfect credit get offered the lowest mortgage rates, while people with bad credit get offered higher rates. Although lenders look at more than just your credit score, your score plays a big role. Paying the small fee to get your FICO credit score will enable you to get more accurate quotes. You can get free, informal mortgage quotes by filling in the information on this page.

3. You Learn More About How Much You Can Afford

The lower the interest rate on a new mortgage, the more house you can afford to buy. By getting quotes targeted to your credit score, you'll have a better idea of the price range in which you should be shopping for a home.

4. Maybe You Don't Need a Bad Credit Mortgage

Your credit score might be higher than you thought, and that's a great thing to know. If you have a good credit score, you don't need to work with bad credit lenders.

5. Reality Check for Credit Repair

What if the score is worse than you expected? Consider that a fortunate reality check. Now you know where you stand, and you can begin working on repairing your credit.

Of course, your credit score doesn't tell the whole story about you, but it is an important point to know as you go loan shopping.

Sources

http://www.myfico.com/ / http://www.annualcreditreport.com/ / http://www.kiplinger.com/

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