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BUY YOUR CREDIT REPORT BEFORE APPLYING FOR HOME LOAN

Starting Wednesday, consumers applying for a mortgage or home equity loan will learn their credit scores under a new federal law.

But learning the score after applying won't do consumers much good. Before applying for any loan, consumers should buy their credit report and credit score. While consumers can't do anything about late payments or other negative items, they can fix mistakes. A report might contain accounts belonging to someone else or outdated information.

It can take up to several months for the credit bureaus to research an error and correct it. A small difference in scores could add thousands to a loan.

On a 30-year, fixed-rate mortgage for $150,000, consumers with credit scores above 720 will get a 5.68 percent interest rate and pay $870 per month, according to myfico.com, a Web site operated by Fair Isaac Corp., which sells FICO scores to lenders. On the same mortgage, a consumer with a credit score of 699 would get a 6.34 percent interest rate and pay $930 per month -- or $23,000 more over the life of the loan.

A credit score is a number that represents a consumer's risk of not repaying a loan. They range from 300 to 850, with an average score somewhere in the 600s. A score above 720 will probably get the best rate.

Credit scores take into account your payment history, amount borrowed, length of credit history, type of credit and new credit. The score is not based on age, gender, race or income.

"For consumers that know they will be in need of a loan at some point in the foreseeable future, they would be best served by obtaining their credit report and score beforehand," said Carlo Airdo, director of credit education for HSBC North America.

HSBC plans to mail credit scores, and the key factors that adversely affect a score, the day after taking a complete application. Banks sometimes use scores from more than one company to make a decision. If so, consumers will receive each score.

But it may do little good after submitting the application.

"In all likelihood, there's not enough time to raise one's credit score from the time an application is taken until a final loan decision is made," he said. "Credit scores take months to improve, and unfortunately, less time to lower, by missing a payment, for example."

e-mail: lhaarlander@buffnews.com

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