Increasing Your FICO Score for Home Ownership
The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of loan for which you'll qualify in Arcadia, Florida.
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 600, but scores are tiered from 300 to 850. Even though more people these days are experiencing job loss and delinquent credit cards, 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 factors in deciding your FICO score are:
- Payment History — Do you pay your bills on time every month?
- 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?
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 solely because of your credit history. You'll need a score of at least 700 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued over time could be more than double that of someone having a stronger credit score.
We're used to working with all levels of credit scores. Contact us and we can help you get on the right track to the home of your dreams.
There are methods to boost your score. Improving your FICO score takes time. It can be difficult to make a large-scale change in your FICO score with small changes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Ensure that your credit history is correct. If you find mistakes on your credit report, contact 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 steer clear of having one card that is at the maximum and have the rest of your 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 taking up the balance a single card.
- Apply for gas station cards or retail credit. For those who have no credit or low credit, store credit cards and gas credit cards are ways to repair credit, increase your credit limits and stay on top of your payments, which will raise your credit. You should always avoid holding a large balance for too long because these types of cards more than likely have a steeper interest rate.
- Keep your cards in rotation. 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, be sure to pay them off in one or two payments.
- Keep up with payments. Payment history is a huge factor in your credit score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to show that you're able to make payments to a bank.
Knowing the methods you can use to build up your credit 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 house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of The Williamson Group Realty, Inc., the loan 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 once per year, for free, you can review all three of your credit reports 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.