Ways to Raise Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts 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 find yourself renting longer than you expected in Stuart until your score improves.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, 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 credit extended to you via a mortgage loan. Some of the factors in reviewing your FICO score include:
- 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 loans and credit cards?
- Payment History — Do you pay your bills on time ?
- Credit to Debt Ratio — How much do you owe versus your available credit?
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 determine 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.
Lenders want to ensure that giving you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you are based solely on your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. You can get approved for a mortgage with a lower score, but the interest accumulated in the long run could be more than double the amount of someone with a higher credit score.
Staying on top of your FICO score is the first step in buying a home. Contact us and we can help you get on the right track to the home of your dreams.
You want an improved score, but how do you get it? Improving 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 few years by keeping tabs 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 pointers:
- Ensure that your credit history is correct. If you find incorrect items 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 steer clear of having one card that is holding 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 sitting on a single card.
- Chain store cards and gas cards. For those who have no credit or below average credit, department 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 FICO score. You must always avoid keeping a large balance for too long because these types of cards normally have a surprising interest rate.
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Stay on top of payments. Late payments hurt 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 build up your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a bank.
Knowing the ways you can build up your FICO score, you're one step closer to becoming a homeowner. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid a negative mark on your credit score. With the help of Premier Realty Group, Inc., shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.
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.