Scoring Your Credit - How's Your FICO?
Choosing a lender isn't the first step in becoming a homeowner. The quality 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 mortgage loan for which you'll qualify in Tamuning, Guam.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 650, but scores are tiered from 300 to 850. In recent years, however, some borrowers have seen their score lowered as a result of unemployment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in calculating your FICO score are:
- Payment History — How often do you make late payments?
- 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?
In reviewing your credit history, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with all of the bureaus.
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your credit score gives lenders a view of what type of borrower you'll 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 a satisfactory interest rate. You'll still get approved for a mortgage loan with a lower score, but the interest accrued over the life of the loan could be more than double that of someone having a higher credit score.
Staying on top of your FICO score is the best way to ease into buying a home. Call us at (671) 647-5577 and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Building your FICO score takes time. It can be rare to make a significant stride change in your FICO score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Chain store cards and gas station cards. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You should always beware of keeping a large balance for too long because these types of cards traditionally have a surprising interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. But, pay them off in no more than two or three payments.
- Keep up with payments. Payment history is a huge factor in your credit score. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to prove that you're responsible enough to make payments to a lender.
- Correct your credit report. If you find mistakes on your credit report, write to the bureau asking 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 maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have all of your debt transferred to one card.
Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Know 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 application process is sure to go more smoothly so you, too, can become a homeowner.
Learn more about FICO scores at 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.