Raising Your FICO Score for Home Ownership
You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet starts the home buying process. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Arcadia.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people traditionally having a score of 650. Since we've experienced an economic downturn, however, some people have seen their score drop by hundreds of points as a result of loss of employment, charged off 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:
- Payment History — Do you pay your bills on time every month?
- 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 credit cards and loans?
When you pull your credit report, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models 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 each of the bureaus.
Lenders want to make sure that giving you a loan is a safe move. Your FICO 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 700 or higher to get a satisfactory interest rate. You can get approved for a mortgage loan with a lower score, but the interest paid in the long run could be more than double the amount of an individual having a better FICO score.
We're used to working with all tiers of FICO scores. Call us at 1-863-494-9009 and we can help you get on the right track to the home of your dreams.
How do you get a stronger score? Building 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 few years by keeping tabs your credit report and by wisely using credit. 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 mistakes on your credit report, write to 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.
- 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 the rest of your cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have the bulk of your debt taking up the balance a single card.
- Apply for service station cards or store credit. For those who have no credit or below average credit, store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You must always avoid holding a high balance for too long because these types of cards traditionally have a steeper interest rate.
- Keep your cards active. 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, pay them off in one or two payments.
- Stay on top of payments. Delinquent payments drastically drop 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 restore your credit with payment history, but it's the surest way to show that you're responsible enough to make payments to a bank.
Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid adverse effects on your credit score. With the help of The Williamson Group Realty, Inc., shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
Get more information by visiting 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.