Few things are more disconcerting than to find a house you want to buy, get a thumb's-up from the seller and then discover that a black mark on your credit record is going to kill the deal.
The credit-reporting system is complex and imperfect. Many people don't even know it exists, and those who do often are puzzled about how it works.To help potential homebuyers deal with the credit maze, Countrywide Mortgage, one of the nation's largest mortgage lenders, is offering a free booklet that explains how credit works.
It tells you what credit agencies do, who they are, where to reach them and what to ask. It offers sample letters you can use to get a copy of your credit report or dispute something in it.
Credit bureaus keep accounts on most Americans who buy anything on credit - a house, a car, a suit, a meal. Millions of retailers send reports to the credit bureaus each month, telling who has paid their bills on time and who hasn't.
Over time, a picture of an individual's creditworthiness emerges.
You may have forgotten that you were four months late on a Visa bill two years ago or that you defaulted on a loan. But the information probably is still there in your credit record.
The three major credit bureaus are:
- TRW, 12606 Greenville Ave., P.O. Box 749029, Dallas, TX 75374-9029. Attention: Consumer Affairs. Phone toll-free 800-392-1122. You can get one free report annually.
- Equifax, P.O. Box 740256, Atlanta, GA 30374-0256. Attention: Consumer Affairs. Phone toll-free 800-685-1111. The fee for an individual credit report in most states is $8, or $16 for a joint report.
- Transunion, P.O. Box 7000. North Olmstead, OH 44070. Attention: Consumer Relations. Phone toll-free 800-851-2674 or toll 714-738-3800. The fee for an individual credit report in most states is $8 or $16 for a joint report.
For a free copy of Countrywide's credit manual, titled "Your Credit and You," call toll-free 800-577-3732.
- If you're a homeowner desperate for cash, you might be interested in GMAC's 100 percent home equity line. The service is available in 43 states for loans between $10,000 and $35,000.
For example, with a house appraised at $110,000 and a first mortgage of $90,000, a homeowner could get a home equity credit line of $20,000.
"Our 100 percent equity line is perfect for those who are looking for extra cash, even though they've just begun building equity in their home," said Willem Nieuwkerk, vice president for home equity operations at GMAC.
Be advised these 100 percent equity loans are much more expensive than an equity loan for 70 percent or 80 percent of a home's value. Rates vary by state but you can expect to pay about 13 percent (prime rate of 9 percent plus 4 percentage points) compared with 11 percent or less on a regular home equity loan.
For more information on this equity line of credit call toll-free 800-888-4622.
- A pilot program started two years ago in Los Angeles has succeeded in reducing fraud that had cheated many elderly and low-income home owners out of the equity in their properties.
Under the program, anyone who signs a property deed in Los Angeles is required to be thumbprinted.
The program was started because of the many ways thieves devise to cheat homeowners. For example, a crook may pose as a homeowner, take out a loan on the property and forge the owner's signature on loan documents. No payments on the loan are made, of course, so the property goes into foreclosure. Or a con artist lists a property for sale, signs over a fake deed to an unsuspecting buyer and walks away with the cash.
With thumbprints, an impostor's ID will be on record in the county. In addition, the Los Angeles County recorder is authorized to notify home owners when a deed has been recorded on their properties.
The extent of the fraud industry in house-rich Los Angeles shows up in the numbers - in just 10 months, 3,400 property owners were notified of deed filings they had not authorized. That allowed them to move quickly to clear up the property title.
The program is funded with a $7 surcharge on all deed recordings in the county.