Scoring Your Credit – How’s Your FICO?

Choosing a lender or a Realtor® isn’t the first step in becoming a homeowner. The quality of your wallet starts the home buying process. To propel your dreams of homeownership forward, giving serious consideration to your credit score is a must. Alongside that focus should be an analysis of the type of lender to use, keeping in mind that a pragmatic choice will increase your odds of success. By this, I mean selecting a lender who will meet the seller’s approval–not yours. After all, the seller holds the keys to your next house. Please the seller with your offer price, terms, AND the company financing your purchase and you are more likely to get your hands on those keys.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. Job loss has been common in the last few years, but FICO scores aren’t necessarily adjusted “on a curve.” A low score is a low score and that often means you can’t get a decent interest rate. Some of the pieces 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 — Do you have too many open accounts?
  • Types of Credit — Do you have a healthy mix of credit cards and loans?
  • Lenders want to make sure that giving you a loan is a safe move. Your credit score gives lenders an insight into what type of borrower you are 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. If your score is lower, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of an individual with a higher FICO score.

    Getting your credit in order is the best way to ease into buying a home. Contact Me and I 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 hard to make a significant stride change in your credit score with quick fixes, but your score can improve in a year by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. You’ll improve your credit score by using these tips:

  • Correct your credit report. If you discover incorrect items 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 sound 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 smaller balance than to have all of your debt taking up the balance a single card.
  • Apply for gas cards or retail credit. For those who have non-existent credit or less-than-stellar 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 FICO score. You should always avoid carrying a high balance for more than a couple of months because these types of cards normally have a larger interest rate.
  • Use your credit. Whether you’re just getting started with credit, or if you’ve got older cards, use your cards to make sure your accounts maintain an active status. But, make sure you pay them off in one or two payments.
  • Pay on time. How often you’re late with payments greatly affects your credit score. It’s one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it’s the surest way to prove that you’re responsible enough to make payments to a bank.

  • Knowing the ways you can raise your FICO score, you’re one step closer to becoming a homeowner. Remember that when it’s time to apply for a loan to purchase a house, you’ll want to keep your lender applications within a one-month window to avoid a negative mark on your credit score.  Multiple applications or “credit pulls” within that period count as just one. With the help of my preferred lenders, the loan application process can be a stress-free experience so you, too, can become a homeowner.

    Learn more about FICO scores at 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.

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