Credit Monitoring Is Your Early Warning System

October 7, 2020

How soon should a borrower start using a credit monitoring service before they apply for a home loan? The short answer is, as soon as possible. All consumers are entitled by law to a free credit report from each of the three credit reporting agencies.

 But reading your credit reports isn’t enough--your home loan planning stage should take at least 12 months for best results (planning and saving takes time) and a lot could happen to your credit between the time you claim your free credit report and the day you fill out home loan application paperwork.

Hope for the Best, Plan for the Worst

What kinds of things could happen? Your report could have someone else’s data accidentally included in yours (especially if you have a common name or a unique name similar to someone else’s). You could become the victim of identity theft and not even know it.

You could have items that were supposed to fall off your credit report that did not.

In short, there’s a lot that can happen to a credit report in a month, six months, a year. If you don’t use credit monitoring you run the risk of these things happening to you without your knowledge. When you apply for the loan and your loan officer discovers such issues, your home loan potentially gets stopped in its’ tracks until you can resolve the situation(s).

Credit Monitoring Is Your Early Warning System

With credit monitoring you opt into a level of protection that can warn you if such issues become present in your credit report. But keep in mind that knowing is only part of the battle--it takes time to contest a credit report problem and no home loan applicant is safe in assuming that the problem will A) get quickly resolved and B) that the credit report will update quickly enough to allow your loan to move forward in a timely manner.

Most likely, if you discover problems with your credit report and you have already apply for a home loan that the resolution will NOT happen on the borrower’s timeline. Especially in cases of identity theft where police reports may be required and an investigation may occur.

What to Do Now

Are you planning to apply for a mortgage? Start looking for a credit monitoring service immediately and pull copies of your credit report in the meantime. You won’t hurt your credit score by requesting your free credit report and you are entitled by law to be provided one from Equifax, TransUnion, and Experian. But don’t forget that simply knowing the contents of your credit report won’t protect you from future issues--you’ll need to watch your credit on a continuing basis until you’ve closed the loan and accept the keys to your new home.

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