Three national credit bureaus collect information from creditors and provide reports to lenders. These reports include a summary of a borrower's loans, credit cards, lines of credit and revolving credit accounts, including detailed information on any late payments or other problems with the accounts.

Based on the information collected, each bureau, using an algorithm created by various vendors, also calculates a credit score for the borrower.

[Factors that can impact a credit score:]

Poor Payment History — Paying bills late, having bills sent to collection agencies, having foreclosures on home loans, having cars or other purchases repossessed or declaring bankruptcy.

Approaching Your Credit Limit — Keeping high balances on a number of credit accounts, especially when the debt is close to the credit limit.

Short Credit History — Having credit accounts for a short time or never having had a credit account or loan.

Too Many Credit Applications — Having too many recent applications for new accounts or loan.

Too Few Credit Accounts — It's better to have a few revolving credit accounts with low balances than 1 or 2 with balances that are close to your credit limit.

Too Many Credit Accounts — Having too many credit cards or loans. Generally, experts recommend having no more than 3 or 4 credit cards.

Credit Problems Don't Disappear Overnight

Past credit problems, such as late payments, can stay on your credit report for up to 7 years from the date the original payment should have been made. Bankruptcies can be reported for up to 10 years.

Lenders do tend to give more weight to the most recent payment information. And no matter what your credit is like now, you can take steps to improve your credit for the future.

About Credit Scores

Credit scores are numeric values that rank the risk of default by an individual according to their credit history at a given point in time. Your score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Mae and Freddie Mac, two of the largest purchasers of home loans from mortgage lenders, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.

Many lenders use credit scores to help evaluate loan applications. A credit score, however, is just one of many factors considered in the underwriting process. Lenders look at the entire picture. Even when a credit score is low, lenders often try to find other factors that could overcome the negative credit issues and satisfy their lending requirements.

Three national credit bureaus (Equifax, Experian and Trans Union) collect credit information and provide reports and credit scores to lenders. Lenders often use a “merged” credit report, considering the information and scores provided by all three of the credit bureaus.

Different lenders may have different standards for loan approval, based on credit scores and other factors. Because credit bureaus don't currently provide credit scores to consumers, it's important to talk with lenders about how your credit profile fits with their requirements and loan programs.

[Have you checked your credit report?]

Many people who think they have good credit are surprised to find issues in their credit reports.

Sometimes that's because they don't understand how borrowing and bill-paying habits affect their credit rating. And sometimes it's because the credit bureau has outdated or incorrect information, or because another consumer's information is mixed with their reports due to similar names or other errors.

It's a good idea to check your credit report every year or so. It's especially important if you plan to apply for a mortgage or another major loan to do so before you apply, in order to improve your ability to obtain a loan or appropriate terms.

If you find mistakes in your credit report, you can take steps to correct them. And if you find issues you didn't know about, you can learn how to avoid those kinds of issues in the future.

You Have the Right to Receive Your Credit Reports

You have the right to get a copy of your personal credit report at any time.

By law, if you have been turned down for a loan or credit card within the last 60 days based on the information in a credit report, you are entitled to a free report from the credit bureau(s) that provided the report to the lender. You're also entitled to 1 free report per year if you're on welfare, are unemployed and plan to look for a job within 60 days, or your report is inaccurate because of fraud.

Otherwise, there may be a fee for each report you request (about $8.00; charges may vary by state).

[How to get your credit report:]

There are three national credit bureaus that provide reports to lenders. You need to make a separate request to each of them, usually in writing. Experts advise obtaining your credit report from each bureau, as the information may vary. Some credit grantors do not report to all three credit bureaus.

Contact the numbers or Web sites below for specific instructions:

Equifax
Credit Information Services
P.O. Box 105496
Atlanta, GA 30348-5496
800-997-2493
http://www.equifax.com

Experian (formerly TRW)
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
888-397-3742
http://www.experian.com

Trans Union LLC
Consumer Disclosure Center
P.O. Box 1000
Springfield, PA 19022
800-888-4213
http://www.transunion.com

How Credit Affects Rates

Good Credit = Lower Interest Rates
Any time a lender gives a consumer a loan, line of credit or credit card, there is a risk that the borrower may not repay the loan on time or at all. If a borrower doesn't repay the loan or pays late, it costs the lender a great deal of money.

Lenders use your credit history, along with information on salary, assets and debts, to predict how much risk is involved with the repayment of the loan. This is much like insurance companies using your driving history to predict your risk of having an accident.

[The difference between low and high credit risk:]

Low Credit Risk
Borrowers with good credit histories, high credit scores, steady income and relatively few debts present a low risk of loss for lenders. So these borrowers often qualify for loans or credit lines with lower interest rates.

High Credit Risk
A borrower who has had credit problems, whose income varies substantially from month to month, or who already owes a lot of money in relation to income poses a higher risk for the lender. In order to offset the potential loss of money if the borrower can't make payments, the lender must charge a higher interest rate on the loan. But over time, a borrower can rebuild a good credit rating in order to take advantage of lower interest rates.

If you've had credit problems, there are things you can do to improve your credit. And Mountain National Bank has special loan programs, like our Credit Repair Mortgage, to help you.

Choices and Guidance
Online and off, we're here to help. Take advantage of our Decision Making Tools or call us and get a Free loan consultation from an experienced Home Loan Counselor.

Improve Your Credit
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Rates and programs subject to change. For consumer use only, not for real estate or mortgage professional use. Some products not available in all states. Restrictions apply.

(equal housing logo) Member FDIC - Equal Housing Lender. Pre-qualification is neither pre-approval nor a commitment to lend; you must submit additional information for review and approval. Approval may be subject to rate increases, satisfactory review, and no change in financial condition. Refinancing may increase the total number of payments and the total amount paid when comparing to your current situation.