Home buyer's Guide to Better Credit
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To realize your goal of owning a home, you must consider your FICO score along with the type of loan for which you'll qualify in Tamuning, Guam.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 650, but scores are tiered from 300 to 850. With the change in the economy, however, some people have seen their score drop by hundreds of points because of job loss, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in summing up your FICO score include:
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- 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 credit cards and loans?
- Payment History — How many late payments have you made?
Lenders want to ensure that allowing you a loan is a safe move. Your credit score gives lenders an insight into what type of borrower you'd be solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get an acceptable interest rate. You'll still qualify for a loan with a lower score, but the interest accumulated over time could be more than double the amount of an individual having a near perfect FICO score.
Improving your credit is the first step in purchasing a home. Contact us and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be difficult to make a large-scale change in your credit score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:
- Spread your debt around. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the majority of your debt transferred to a single card.
- Apply for gas station cards or chain store credit. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to obtain credit, increase your credit limits and keep up your payments, which will raise your FICO score. You should always beware of keeping a high balance for more than a couple of months because these types of cards usually have a higher interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts stay active. But, pay them off in one or two payments.
- Keep up with payments. Payment history is a big factor in your FICO score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to show that you're responsible enough to make payments to a bank.
- Correct your credit report. If you discover 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 give extra care to make sure the activity reported is correct.
Knowing the ways you can build up your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when you're ready to apply for a loan to purchase a home, you'll want to keep your lender 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.
To learn more, visit myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.