Your credit report shows a mortgage lender your credit management history, but it doesn’t give them the full picture of your finances. That matters when you’re buying a home. Lenders consider more than your credit history when reviewing your mortgage application. Learn more about what your credit report shows, what your credit report doesn’t show and what you can do to put your best foot forward when you’re in the market to buy your first home.
What Your Credit Report Shows
Your credit report is primarily a record of your borrowing and repayment history. It is an important tool for lenders to review that can give them a quick snapshot of your ability to pay back debt. Your credit report can include information such as:
- Credit accounts: Credit cards, auto loans, student loans, mortgages and other credit accounts can appear on your report, along with information such as balances, account status and payment history
- Credit inquiries: Applications for new credit can result in hard inquiries appearing on your report. Recent credit activity can be considered when your mortgage application is reviewed.
- Negative credit information: Late payments, accounts in collections, charge-offs and bankruptcies can appear on your report and provide information about past credit problems
This information is vital for lenders to assess your mortgage readiness, but some of the financial information that matters when you’re buying a home isn’t on your credit report at all.
What Your Credit Report Doesn’t Show—But Your Lender Will Consider
Your credit report doesn’t show your complete financial situation. During the mortgage process, your lender will verify financial information that isn’t included on your report.
- Your actual credit score: A standard credit report is a record of your financial history rather than a score. Mortgage lenders run your report through specialized scoring models to generate the specific scores used for underwriting. These often differ from the consumer scores you see on free tracking apps.
- Income and employment: Your credit report doesn’t show your salary or whether you’re currently employed. Your lender will verify your income and employment using pay stubs, W-2s, tax returns or other documentation
- Savings and investments: Checking and savings balances, brokerage accounts and retirement accounts such as a 401(k) generally aren’t included on your credit report. Your lender will verify these assets to document funds for your down payment and closing costs.
- Other assets: Your credit report isn’t a list of everything you own. Assets such as a vehicle you own outright, assets purchased without loans or other property won’t appear on your credit report. Your lender will verify qualifying assets as part of the mortgage process.
- Bank activity: Your credit report doesn’t track deposits, withdrawals or everyday spending. Your lender will review bank statements to verify available funds and understand the financial activity in your account to get a better idea of your cash flow.
- Your spouse’s credit history: Marriage doesn’t combine two people’s credit reports. If you’re applying for a mortgage together, the lender will review each applicant’s credit and financial information separately.
Your lender will verify this information as part of your mortgage application alongside your credit report. Your credit report shows how you’ve managed credit and debt, while the rest of your mortgage application shows your current financial situation. Looking at both gives your lender a more complete picture than your credit report alone.
Check Your Credit Report Before Applying
Because your credit report can play an important role in the mortgage process, review it before applying for a home loan. Look for errors that could affect how your credit history is being viewed.
- Accounts that aren’t yours: An unfamiliar credit card, loan or collection account could be a reporting error or a sign of identity theft.
- Incorrect account status: Make sure your accounts aren’t incorrectly reported as open, closed, current, late or delinquent.
- Incorrect account ownership: Check that you’re not listed as the primary owner of an account when you were only an authorized user.
- Duplicate debts: Make sure the same debt isn’t being reported more than once.
Also check your personal information, including your name and addresses. Errors can sometimes indicate that information belonging to someone else has been mixed into your file. You are entitled to one free credit report per year from each of the three reporting agencies: TransUnion, Equifax and Experian. You can access your credit reports from all three at www.AnnualCreditReport.com.
While your credit report is an essential starting point, mortgage lenders always look beyond its pages to evaluate your complete financial picture. Understanding where your report falls short gives you the upper hand—allowing you to correct costly mistakes ahead of time and handle additional documentation requests with ease.