Fannie Mae Foundation: How to Buy a Home

Expected outcomes of
Lesson 3

1. To know what a credit report is, how it is used, and how to get one.

2. To be able to complete mathematical operations related to calculating
personal financial liability.

3. To become aware of the possibility of creating a nontraditional credit
history.

Vocabulary
credit report, verify, credit reporting agency, nontraditional credit history, dependents, credit limit, liability, spouse, pre-qualify

Introducing a credit report
1. Get a copy of an actual credit report or use the one on page 18 of the
student workbook to discuss the concept of the credit report. If you have an overhead projector
available, you may want to make a transparency of the report to use during the presentation.

2. Ask how many students already have obtained or requested a credit report in the past. Explain that credit reports may be requested for many kinds of loans, such as small-business or car loans, in addition to housing loans.
(Do not be surprised if many students are not aware of the existence of credit reports or that this information is collected.)

3. Point out that there are four key kinds of information collected: personal information, residence information, employment information, and credit history.

Extension activities
Have students look in the Yellow Pages for the names of local credit reporting agencies. Ask for volunteers to call one or two of them to see how they can request copies of their credit report.
You can order a copy of your credit report from any of the three major credit reporting agencies:

Equifax, 1-800-685-1111

Experian, 1-800-422-4879

Trans Union, 1-800-916-8800

Consumers who have been denied credit can obtain their credit report at no charge. If you have not been denied credit, fees to obtain your report vary from state to state. (Some states allow one free credit report per year.)

Unit 1: Do You Want to Buy a Home?

Lesson 3: Your credit report

When you apply for a mortgage loan, you must list all your long-term debts and the monthly payments you make.In order to verify (double-check) that this information is correct, the lender will order a credit report on you and on all co-borrowers. The credit report confirms your present and former places of residence (where you have lived), your job history, and your credit history. It shows how much money you owe and how long you have owed this amount. It also shows the type of loan and your repayment plan. This information helps the lender decide if you will be able to repay a mortgage loan.

You can request your own credit history from a credit reporting agency. The names of the credit reporting agencies in your area can be found in the Yellow Pages of the telephone book. Some credit reporting agencies will provide you with a free report. Others will charge a small fee. You should check your credit report to make sure that it is accurate, and clear up any errors before you get ready to buy a house.

If you don’t have credit cards and have never taken out a loan from a bank or business, you can still put together a credit history. You can create your own report showing that you pay your rent, telephone, car insurance, medical, and utility bills on time each month. For example, you can collect records of canceled rent and utility bill checks and make copies of monthly bills that do not have late charges. This is called a nontraditional credit history.

This lesson will help you learn to read a credit report and to practice the math skills you need to keep track of your total monthly debt payments.

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