How a Credit Report Affects Your Ability to Buy a Home

Your credit report is requested by more than just your mortgage lender. Companies wanting to sell you something may want to look at it, even prospective employers. Credit card companies, car dealerships, land lords and perspective employers may all ask permission to look at your credit report. Issues on your credit report may affect interest points on your mortgage; it could even cost you a job. In order to protect consumers, Congress enacted the Fair Credit Reporting Act (FCRA) in 1996 to improve credit reporting practices.

Use of Credit Reports is Regulated by FCRA

FCRA regulations state those with your permission are allowed access to your credit reports. In fact, the law requires if you are denied a job due to information on the report, you must be informed of the specific reason. If you are denied a loan due to information on the report, you must be told which company produced this negative report. This gives you the opportunity to rectify any errors that may be on the report.

Consumers Have the Right to Challenge Mistakes or Errors

In order to correct the issue, you must go to the credit reporting agency and the company or person that is responsible for the negative report. It often takes a long time to get these corrections made. You will want to ensure that the other reporting agencies do not have the same mistake and then make sure they begin the process of correction as well. The credit reporting bureau will also examine the issue. Once they agree that there is a mistake, make sure that the item is removed from your credit report. Keep copies and dates of every step in the process, in case starting the process again becomes necessary.

What Can You Do About Negative Information on Your Report

Negative information can only be left on your credit report for seven years. If you find a forgotten debt, take the opportunity to pay it off, which will go a long way with lenders. Finally, keep tabs on how long negative information is left on your report. Once the seven years are up, you will find getting loans will come much easier. If you have too many credit cards but are not using them, that can give you a negative score. Close accounts of any cards that you don’t use. It is better to have a several credit cards with low balances than to have one or two that are maxed out. It may take a while for these changes to be reflected on your credit report.

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