Is there a difference between a credit score and a credit report?

You’ve probably heard of both, but you may not know the difference between them. Credit reports and credit scores are closely related, but they aren’t the same thing. However, both are useful when it’s time for you to buy property, so here’s what you need to know about each.

What’s a credit report?
A credit report shows your credit habits and history. It tracks how much debt you have, including student loans and on credit cards, and when you pay your bills. It may even show information about bills you may not think are related to your creditworthiness, like your utility or cable bills. Credit reports may also show whether you’ve been sued or declared bankruptcy.

You can request your credit report for free. There are three credit-reporting companies, TransUnion, Experian, and Equifax, but you can access any of their reports through annualcreditreport.com. Although you can only request one free report from each company per year, it might be a good idea to stagger the requests rather than pull all three at once so you can monitor your credit throughout the year.

What’s a credit score?
Think of a credit score as the grade you get based on your credit report. Credit scores are not free to obtain like credit reports, but the same three companies provide them. Scores are a three-digit number, and higher scores mean a higher likelihood that you’ll be approved for a mortgage loan.

Scores can also vary based on the source providing it. For example, some credit card companies have started providing cardholders with a credit score as part of their benefits. While these scores can be helpful to track, they are only one tool for determining your creditworthiness, and may be different than what a mortgage lender uses.

What’s the takeaway?
Your credit report and your credit score are two important tools to keep track of when you’re thinking about investing in property. But since the information you get from either can vary, it’s a good idea to work with a professional to understand your creditworthiness. Your Texas REALTOR® can help you find all the tools and professionals you need to put you on the path to homeownership.

Author: Editorial Staff, Texas Association of REALTORS®

Avoid these mistakes between loan approval and closing

You've been careful with your finances, saved for a down payment, and finally received approval for a mortgage loan. It’s time to celebrate, right?

Not yet. Your lender will recheck your credit right before closing. Don't give him or her reason to question your creditworthiness by making these mistakes:

1. Changing jobs
Changing employers could mean delays due to employment and salary verifications. Of course, you shouldn't ignore a great career opportunity. It means only that optional moves should wait.

2. Making a big purchase
Your debt-to-income ratio is an important factor when being considered for a loan. If you add to your debt by purchasing a car or boat, you risk exceeding the ratio that your lender finds acceptable. 

3. Opening credit accounts
You might apply for a credit card so you're ready to buy furniture for your new house. But similar to taking on new debt, applying for a new credit account can harm your mortgage approval. The credit inquiry necessary for the new account will ding your credit score a few points, and the lender might wonder just how much you plan on spending with that new account.

Part of the mortgage process is a final check to ensure you can afford the loan. Neither you nor the lender wants the payments to be a struggle, so don’t give the lender any reason to doubt your creditworthiness.

Author: Ward Lowe, Texas Association of REALTORS®

If you have questions regarding your property, please call us today for a FREE consultation!