When you apply for a mortgage, lenders might look at your Residential Mortgage Credit Report (RMCR) to evaluate your creditworthiness as a borrower. This report provides a detailed overview of your credit history, including your credit scores, payment history, outstanding debts and any negative marks such as late payments, defaults or bankruptcies. Lenders start out by pulling your tri-merge report first.

What’s a tri-merge credit report?

Think of this as a high level snapshot of your overall credit score. It pulls info from the three big credit bureaus—Experian, TransUnion and Equifax—into one handy report. Each bureau might have slightly different stats on you, so a tri-merge offers a good general overview.

Underwriters use the middle score of your tri-merge credit report, or if you're applying with a partner, the lowest middle score of the two borrowers on the application.

Let's simplify this with an example involving two individuals, John and Dave:

In John's case, the middle score is 667 from Experian, so lenders will primarily use this score when evaluating his application.

For Dave, the middle score is 720 from Equifax, so this will be the score lenders use for him.

When applying together for something like a loan, the score used will be the lower middle score between the two applicants. In this case, it would be John's 667.

When assessing their application, debts from both John and Dave will be considered, regardless of whether both are occupying the property or if one is just a co-signer.

A residential mortgage credit report (RMCR) goes a step further. It's not just a blend of the three reports but takes a close look at each of them. For instance, if there are differences between the bureaus' reports, the RMCR will explain why. It might also check employment and housing history to give lenders a clearer view of a borrower’s total financial picture.

Credit reports for a mortgage start out light and get heavier as you get closer to that stamp of approval. Here’s what to expect as you go through the process:

• Application stage: Right off the bat, when you fill out a mortgage application, the lender will pull a credit report to peek into your financial history. This is the tri-merge we talked about, which gives the lender a summary of your credit standing.
• Further review: If things look good and you move forward, the lender will request an RMCR. This is especially useful if you're self-employed or have a few dings on the credit roster as the RMCR helps lenders get the full story.
• Final approval: Before giving the final thumbs up, your lender will use the details in the RMCR to make sure everything looks a-okay. It's their way of double-checking their risk before handing over the house keys. Fair enough.

Let's face it, not everyone has a credit score that’s above 800. If your score looks a bit rough around the edges, don't beat yourself up. You're not alone and you can improve that score until it impresses. Here’s how you can start turning things around:

• Check for errors: Yup, even credit bureaus make mistakes. So, grab a copy of your credit report and review it like a hawk. Sometimes, you'll find errors and, just like a typo on your resume, you'll want to correct it before it hurts your reputation. Incorrect information can drag down your score while fixing errors can give it a boost.
• Pay down debt: If your credit cards are screaming under the weight of high balances, it's time to ease their burden. Set yourself up with a budget and stay the course until balances are below 30% of your credit limits.
• Keep old accounts open: You might think closing an old credit account could improve your financial image, but it's actually the opposite. Think of your old accounts like fine wine—the longer it's been around, the better. Keeping them open can help lengthen your credit history, which is a plus in the eyes of credit scorers.

Remember, improving your credit is a journey, not a sprint. It takes patience, persistence and a bit of financial elbow grease. You'll soon be on your way to "excellent" and closer to making big dreams come true.

So, there you have it—a simple breakdown of what a residential mortgage credit report is and why it matters when you're in the housing market. But remember, good credit does more than just open doors to dream homes. It paves the way for better loan rates and even new car purchases. In short, good credit says you're a reliable human (which you most certainly are.) 

Keep it healthy, stay informed and see how many doors good credit can open!