Know the score: Improve your credit before applying for a mortgage

BY ANDREA JARES
Knight Ridder Newspapers

(KRT) - Historically low mortgage interest rates have helped make homeownership possible for scores of people.

But before shopping for a house, potential buyers should check their credit scores because they affect the interest rate they will receive from a lender.

Credit scores range from 300 to 850 points and are affected by the amount of debt you have, your payment history, number of credit cards, public records, how long you have had credit and the mix of credit you have used.

The National Association of Mortgage Brokers offers several tips that can help prospective home buyers get their credit score in shape:

_ Obtain your credit score through the three credit reporting bureaus: Equifax, (800) 685-1111, www.equifax.com; TransUnion, (800) 888-4213, www.transunion.com; and Experian, (888) 387-3742, www.experian.com. Generally, there's a fee for a report unless you have been turned down for credit because of something in a report.

_ Bring credit card balances down to less than 30 percent of the credit limit.

_ Keep the number of credit card inquiries down. The number of inquiries during the last 12 months might affect your credit score.

_ Do not get rid of credit cards and lump all your debt onto one card. Having a low balance on several cards is better than having a balance of more than 30 percent of the available credit on one card.

_ Keep your credit card accounts open and active, using them at least once every five months. Talk to a mortgage broker before closing an account because closing it might have hurt your credit score.

_ At least 90 days before applying for a loan, check a credit report to see if it is correct. Tell the credit reporting company about errors or outdated information.

_ When correcting inaccuracies on a credit report, send the correct information in a letter to the credit reporting bureau, requesting a return receipt. Include documentation. The Fair Credit Reporting Act indicates that it takes about 30 days to change a credit report.

_ A collection account or judgment will stay on a credit file for seven years, even if it gets paid off.

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