Increasing Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you lack a strong credit score to back it up, you could end up renting longer than you expected in Manorville, New York until you raise your score.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. 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 credit. Some of the factors in summing up your FICO score include:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many late payments have you made?
- 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?
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 FICO score gives lenders an insight into what type of borrower you'll be based solely on 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 an acceptable interest rate. You'll still qualify for a mortgage with a lower score, but the interest accrued over the life of the loan could be more than double that of an individual having a superior FICO score.
Improving your credit is the best way to ease into owning a home. Call me at (631) 281-8600 and I can help you get on the right track to the home of your dreams.
You want an improved score, but how do you get there? Building your FICO score takes time. It can be hard to make a significant change in your number with small changes, but your score can improve in a year by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. You'll improve your credit score by using these pointers:
- Keep up with payments. Payment history is a big 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 build up your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
- Ensure that your credit history is correct. 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 don't want to have 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 about less than 40% of their credit limit than to have the majority of your debt transferred to a single card.
- Apply for service station cards or store credit. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and have a solid payment history, which will raise your FICO score. You should always avoid holding a high balance for more than a couple of months because these types of cards more than likely have a surprisingly high interest rate.
- Don't let your cards get dusty. 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, make sure you pay them off in one or two payments.
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. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Talmage Trail Realty, the loan process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
I work with all tiers of credit and can help you settle into home ownership with the best lending insitution for you. E-mail me at firstname.lastname@example.org or call (631) 281-8600 for additional information.