If you plan to buy a home this year, there’s a decent chance you’ve been browsing listings and looking into the steps required for a pre-approval. But before you get too far into the process, it’s important to check your credit report.
Your credit report plays a key role in the mortgage process. The details illustrate how you’ve managed debt over the years and can influence everything from your loan options to your interest rate.
The good news is that you don’t have to be a financial professional to make sense of your credit report. Reading your report now — and knowing what to look for — can help prevent surprises and correct potential errors as you gear up for the spring housing market.
Where to Find Your Credit Report
You can access your credit report for free at AnnualCreditReport.com, the only government-approved site for checking your credit with all three major bureaus: Equifax, Experian, and TransUnion. Each bureau may report slightly different information, so it’s worth reviewing all three regularly.
Please note that your credit report is different from your credit score. While a score gives you an overview of your credit health, your report provides the full story. In simple terms, it details your payment history, debt balances, and other financial habits.
What’s Inside Your Credit Report?
Your credit report might not be the most thrilling thing to read, but when you're buying a home, it plays a big role. It helps lenders see how well you manage payments, how much debt you have, and if there's anything that could affect your mortgage approval. Keeping an eye on it can help you stay on track for homeownership success.
So, what exactly is in your credit report? Let’s break it down:
Personal information
This section includes your name, current and past addresses, and sometimes your employment history. Check it carefully for discrepancies, since incorrect information — like an address you’ve never lived at — could indicate a reporting error or, rarely, identity theft.
Account history
Every credit account you’ve opened, from mortgages to car loans, is listed here. This section shows your account status, your current balance, and the amount of credit you have available. A longer credit history may work in your favor, so think twice before you close older accounts.
Payment history
This section of your credit report highlights your payment history, one of the most important factors in the mortgage approval process. Staying consistent with payments can boost your eligibility.
Credit utilization
This section of your report shows how much of your available credit you’re using. Think of it this way: if you have a credit card limit of $10,000 and a balance of $4,000, your utilization is 40%. Most lenders like to see this number below 30%, although FICO advises keeping it below 10%.
Hard inquiries
When you apply for new credit, lenders check your credit report. This is recorded as a “hard inquiry.” (Checking your own credit report is considered a “soft” inquiry.) Lenders see multiple “hard” inquiries in a short period as a sign that you may be taking on too much debt.
Negative items
While this section includes things like late payments, accounts in collections, bankruptcies, and foreclosures, don’t worry, there’s always an opportunity to strengthen your credit over time. Lenders consider your full financial picture when reviewing your mortgage application.
At first glance, your credit report might seem overwhelming — but understanding it puts you in a powerful position when it's time to apply for a mortgage. Taking a little time to review it now can set you up for success and make all the difference when you're ready to make an offer this spring!
What If You Find an Error?
Mistakes on credit reports are more common than you might think — but the good news is, you have the power to fix them. A mistakenly reported late payment, an old account showing as open when it’s closed, or even signs of fraud could impact your score without you knowing.
If you spot an error, you can dispute it directly with the credit bureau, and most issues are resolved within 30 to 45 days. Taking care of any discrepancies now ensures your credit report is in great shape when it’s time to apply for a mortgage.
Experian, TransUnion, and Equifax all accept online and phone disputes, plus disputes by mail.
Where Does Your Credit Score Come in?
Your credit report is different from your FICO credit score, although the two are directly related.
Your credit score is calculated based on the information in your report, including payment history, credit utilization, and length of credit history. Just as your report offers the full scope of your financial habits, your score is a shorter summary that lenders use to see how you might qualify.
Most conventional mortgage loans require a credit score of 620 or higher, while FHA loans may be available with a score as low as 580 (or 500 with a larger down payment).
Next Steps: How Your Credit Score Impacts Your Mortgage Options
The spring homebuying season moves fast, but you can prepare now by reviewing your credit report. Understanding your report will help you make the best decisions for your financial future. If your credit is not the best, there are ways you can increase it. Or, if you have no credit at all, now is the perfect time to start building it.
And, there’s more good news: even if your credit isn’t exceptional, you may still qualify for a home loan now if you are otherwise financially eligible and ready to own a home. Mortgage options for people with bad credit or no credit are out there — it’s just a matter of finding the right lender who can match you with the best program.
If you’re ready to learn more about the impact of your credit report on homeownership opportunities or explore your mortgage options, find an experienced loan originator in your area.
