Credit Score: Should You Check Yours Before Getting a Mortgage?

Last Updated Jul 22, 2011 10:34 AM EDT

I'm planning on selling my home and buying a new one in the next few months. I'm hoping that some careful planning will help me avoid some unnecessary headaches along the way. One lesson I learned when I bought my current apartment is that I should have checked my credit reports before I applied for a mortgage.

What happened? I've always had good credit so I didn't bother pulling my reports before I applied for a home loan. But once my mortgage broker started contacting banks, we discovered that my file contained an error and I couldn't move forward until I cleared up the confusion.

The good news is that it's easy to get a free credit report. And as I've learned, doing so is certainly worth the effort. All you have to do is go to AnnualCreditReport.com. If you find some erroneous information, you can contact the credit bureaus and file a dispute.

With this home purchase, however, I don't want to simply glance at my credit reports. I would like to see what the lenders are looking at. In other words, I wish to review my FICO credit score. Some people would argue that this isn't necessary since lenders are more interested in your behavior (for example, do you pay your bills on time) rather than your "number". This may be true. But I still think it will be helpful since the best interest rates go to the home buyers with the highest scores. Once I confirm that I qualify for the most competitive rates, I'll be able to better budget how much home I can afford to buy and argue with any lender that may try to convince me I should pay more than I have to for a mortgage.
So how do you get your credit score? All you have to do is log onto MyFICO.com and sign up for the free trial of Score Watch. (You get to test drive the product for 10 days before your $14.95 monthly subscription officially starts.) I did this a few days ago and got to see my official "number". The product also walked me through all of the accounts listed on my credit file and it explained what I could do to raise my score. (I need to start using more cash instead of relying so heavily on my credit card for my daily purchases.)

I also discovered that my report once again contains an error I will have to fix. Hopefully it won't be too difficult to convince the credit bureaus that I don't live in New York and Texas.

My favorite Score Watch feature is that it simulates what will happen to my credit score (within a range) if I do different things, including applying for a home or auto loan. I find this particularly helpful since it reminded me that I should secure my mortgage before buying a car.

I just canceled my free trial of Score Watch. If I had average credit and wanted to work toward raising my score, I would probably consider keeping this service and paying the subscription fee. The product explains what activity is weighing on your risk profile and what you can do to improve it. Then, as you change your behavior you can watch as your number rises.

As for my next move, it's time to pull my official credit report and dispute that Texas address.

Did you pull your credit reports before applying for a mortgage?

Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
MyFico Equifax Score image courtesy of Flickr, CC 2.0.
More on CBS MoneyWatch:
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How Much House Can You Really Afford?
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  • Stacey Bradford

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