What Home Buyers Should Know Before They Begin to Shop
Provided by the credit scoring experts at Fair Isaac Corporation

Getting a mortgage should start with understanding your credit health, not filling out a loan application. Knowing your FICOŽ score early, and working to maintain and improve it throughout the home-buying process, can improve the terms of your mortgage and your long-term financial health.

The FICOŽ score, developed by Fair Isaac Corporation, is calculated by each of the three major credit reporting agencies - Equifax, Experian and TransUnion - from a mathematical formula that evaluates many types of information from your credit report.

Lenders use your FICOŽ score to help them determine the mortgage rate they'll offer you. The better the score, the better lower their risk of lending you money, therefore the lower the interest rate. This could add up to many thousands of dollars over the life of the load.

Your credit score reflects your credit management history, and you can't improve your history overnight. But there are steps you can take to make sure you have the best score possible when you're ready to apply for a loan.

1. Get your FICOŽ Report 6-12 months before you want to buy. You can purchase your FICOŽ Report from myFICO. You'll receive your FICOŽ score, a full credit report from Equifax, plus an explanation of your score, what it means to a lender and suggestions for improving your score over time.
2. Have any co-applicants do the same. Even though the FICOŽ score is generated on an individual basis, each lender has its own policy for dealing with joint loan applications. Some consider an average of the scores, some the lowest score, some the highest, while some use other calculations. By knowing the FICOŽ scores of your co-applicant(s), you will be prepared for any situation.
3. Apply what you learn. If you understand your FICOŽ score early enough, you'll have time to improve it by demonstrating better credit management. So start following the tips for improving your score as soon as you can.
4. Rid your credit report of errors. An important first step is to make sure your credit report is free of errors. If you find an error and report it to the credit reporting agencies, they are required to investigate and respond to you within 30 days.
5. Do your loan shopping in a concentrated time period. You can shop with a direct lender who, as the name applies, will lend you money directly with a limited variety of in-house loans. You can also shop with a mortgage broker, who has access to many different loan products from 40 different lenders at any one time, on average. Whichever route you choose, it is best to do your serious shopping within a couple of weeks.
6. Monitor your progress. If you're working to improve your score, make sure to check your credit score for improvements on a regular basis. Building a solid credit history takes time and patience. There are no short-term strategies for improving your credit score.