How Can You Get a Mortgage After Your Identity Has Been Stolen? - Financial security experts will tell you that you should look over your credit reports once a year, but the truth of the matter is that many Americans don't bother to check their credit until they are ready to make a big purchase, like a car or home. When they do, many of those same people are shocked to find out that they are the victims of identity theft.
What can you do once you've realized that your identity has been stolen, and how can you clean up your credit at “crunch time” – like when you're trying to buy a home?
Unfortunately, it's nearly impossible to fix a faulty credit report immediately, so if you find out at the last minute that you're an identity theft victim, your loan application is likely to get denied.
So how can you protect yourself before the unthinkable happens?
First, lenders say you need to be proactive instead of reactive. Start checking your credit reports long before you are ready to start searching for a home. That way, you can notice any discrepancies, including any fraudulent purchases or credit cards under your name that you weren't aware of. Every consumer is entitled a free credit report once a year from each of the three major credit bureaus. Lenders will look at your FICO credit score from each agency, so it's important that you check all three.
If you notice anything that shouldn't be on there, contact the appropriate credit agency. This will not only protect you from identity theft, but it can also help you remove anything from your past that shouldn't be on there. For example, if you paid off a credit card and closed the account – but it was never noted on your credit report – that can hurt your FICO credit score.
If there are any discrepancies, be prepared for it to take awhile for them to disappear from your credit report. You're going to need documentation of everything before any changes will take place. Using our credit card example again, you'll need the credit card company to send a letter on their letterhead to the appropriate credit bureau stating that your account has a zero balance and has been closed.
If you think that's a hassle, imagine the hoops you're going to have to jump through to remove fraudulent purchases from your credit report! It can take months, and sometimes years, to completely undo all the damages caused by identity theft. But just because it takes a long time doesn't mean you have to wait until everything is removed from your credit report to start applying for a home loan.
Once you've set the wheels in motion, take any and all documents with you to your lender. They are going to want proof that the fraudulent charges are in fact fraudulent. They’re also going to want to see that you're taking steps to remove them from your credit report.
Lenders are already stricter these days with underwriting guidelines thanks to the recession and housing market's collapse a few years ago, and they're going to ask even more cautious if you have a questionable credit history. Being the victim of identity theft can make things hard enough, but not knowing how to correct the problem is even worse.
But by using these tips, you'll be better prepared to fight the uphill battle. Eventually, you’ll be able to fix the credit that someone else destroyed, and in the end, you’ll still be able to purchase the home of your dreams.
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