How's Your FICO?
You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. Without an acceptable credit score, buying a house is more difficult and, you could find yourself renting longer than you expected in Tamuning until you raise your score.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people traditionally having a score of 650. With the change in the economy, however, some people have seen their score drop dramatically after loss of employment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in determining your FICO score include:
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time ?
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your credit score gives lenders an insight into what type of borrower you'll be based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over time could be more than double that of someone having a better FICO score.
Improving your FICO score is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get there? Improving your FICO score takes time. It can be difficult to make a significant stride change in your number with quick fixes, but your score can improve in a year or two by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts stay active. But, be sure to pay them off in one or two payments.
- Pay on time. Late payments hurt your credit history. It's one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. If you find mistakes on your credit report, contact the bureau requesting that the item be removed. If you have a common name or the same name as a family member, you'll want to pay extra attention to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have the most of your debt sitting on a single card.
- Apply for gas cards or retail credit. For those who have no credit or low credit, chain store credit cards and gas credit cards are ways to get credit, increase your spending limits and keep up your payments, which will raise your credit. You should always beware of maintaining a high balance for more than a couple of months because these types of cards traditionally have a higher interest rate.
Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Keep in mind that when you're ready to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Latte Stone Properties, LLC, the loan process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting myFICO.com, Fair Isaac's informational site and review your credit history for free at annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: equifax.com, experian.com and transunion.com.