Want a Mortgage? Start by Settling Your Score

Anyone who's been denied credit may feel the old adage "you can't fight city hall" should be replaced by a new axiom: "You can't fight the credit bureaus." But not only can you fight the credit reporting agencies, if you're even thinking about applying for a mortgage in the future, you almost certainly need to.

Four out of every five credit reports contain errors, according to research by the National Association of State Public Interest Research Groups. The experts at Lexington Law, a law firm that focuses on helping consumers clean up their credit reports, advise that these errors often affect responsible consumers who pay their bills on time.  Every negative entry lowers your credit score. If your score dips too low, below 560, you may not be able to get a mortgage.

If you are able to get a mortgage, a low credit score can cost 10s of thousands of dollars over the life of the loan. For example, consumers rated "prime" by credit bureaus may secure a $200,000 30-year loan at a rate of 6 percent. Damaged credit could land you with a rate of 8 percent or more, costing an additional $90,000 over the life of the same loan.

The experts at Lexington Law, who regularly help consumers remove negative entries from their credit reports, offer the following tips for pre-mortgage clean up of your credit score:

* Know your score. Months before you intend to apply for a mortgage, get a free copy of your credit report from www.annualcreditreport.com, the only site authorized by the Federal Trade Commission to provide these reports. Get scores from all three of the major reporting bureaus - Experian, Equifax and TransUnion.

* Make sure the payment history for all accounts listed on your credit report - including credit cards, retail accounts, installment loans finance company accounts and mortgage loans - is accurate.

* Assess the total amount owed on all open accounts. Is it accurate? Can you afford to lower it by paying off some debts? Remember, paying off your credit cards every month doesn't mean your credit report won't show an open balance. The total balance on your last statement is likely what will appear on your credit report.

* How many open accounts do you have and how many are carrying balances? A large number of open accounts, even with small or zero balances, can indicate a higher risk of over-extension.

* How close are you to "maxing out" your available credit? Even if you have a responsible payment history, if your balances are close to the limit of your available credit, it will have a negative impact on your credit score.

* Remove as many negative items from your credit report as possible. Removing questionable negative items from your credit reports can have a huge impact on your credit score. There is no law that states that a negative item must remain on your credit reports for seven years. You can have it removed long before that.

To learn more about how to improve your credit score, visit www.lexingtonlaw.com, or call (800) 280-9121.

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