Free Nolo's Essential Guide to Buying Your First Home by Ilona Bray, Alayna Schroeder, Marcia Stewart

that appear, and that the amounts borrowed are accurate. Keep in mind that some types of loans, like student loans, can be sold or transferred. In that case, all creditors that have held the loan will appear, but the pre-transferred or sold accounts should no longer be designated “open.”
    • Open credit lines. Make sure any lines of credit you’ve closed are no longer shown as open. Different reporting companies use different terminology, so if you’re not sure, call to clarify.
    • Collections and judgments. Make sure any collections actions or judgments are reflected accurately.
    • Late payments. These notations will usually indicate a late payment of 30, 60, or 90 days. Make sure they’re accurate.
     

Correcting Credit Errors
     
    Credit reporting mistakes happen frequently. Inaccuracies in the report affect your score, and if your score drops, so does the likelihood of you getting the best possible loan. You’ll want to spot and correct any errors before a lender sees your report, not after you’ve applied for a loan and been rejected.
    All manner of mistakes are possible—from bits of credit history that aren’t yours to a false claim that you paid a bill late. To correct such errors, contact the reporting agency in writing. If all three agencies misreported the information, you’ll have to contact all three. Each agency may have a different procedure and forms to use for disputing the report. When you discuss issues over the phone, make sure to document conversations, including the date and name of the person you spoke with. Finally, if you have any documentation that supports your claim, send a copy with an explanatory cover letter.
    The credit reporting agency has 30 days to investigate your complaint and give you its findings. If it can’t verify that its version of events is correct, the agency is supposed to remove the information from your file. If it won’t, you have the right to place a statement in your file giving your version of what happened.
    Sometimes you can also work directly with your current and former creditors to correct inaccuracies or solve problems. If you’re willing to pay the disputed amount, or the creditor is willing to settle for a lesser amount—which it sometimes is—the creditor may also agree to clear the item from your credit history. Likewise if you have proof of an error, it may be faster to go directly through the creditor than to correct it through the reporting bureau.
     
    CHECK IT OUT
     
    Need help patching up your credit? See Credit Repair , by Robin Leonard and John Lamb (Nolo). It offers plain-English explanations and over 30 forms and letters to help you negotiate with creditors, get positive information added to your credit record, and build a financial cushion.
     

Repairing Your Credit
     
    Rome wasn’t built in a day, and credit history can’t be repaired in one, either. If you or a coborrower have a poor credit history, Fair Isaac suggests you start cleaning it up six to 12 months before applying for a loan. If your credit history is really messy, it may take even longer.
    But here’s some good news: Even if you have a long, ugly credit history, your score will be weighted in favor of your latest performance. Turn over a new leaf by following these strategies:
    • Pay on time from now on. Don’t miss due dates for credit cards and other bills. Setting up automatic payment plans can help, and your lender may reduce your interest rate in return.
    • Pay the worst first. Start by paying off high-interest debt, like on credit cards. Also, keep your balances low on revolving lines of credit. Don’t just move the debt around—that won’t fool the credit scorers, nor will it free up cash for a mortgage payment.
     
     
    TIP
     
    Check out FHA loans. Some low down payment federal loans are less strict about credit background. See Chapter 7 for details.
     

What’s Your Monthly Budget? Understanding Your Finances
     
    Now that you’ve seen what