FICO - The First Step to Home Ownership
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins with your finances. Without an above average credit score, entering into a loan for a house is harder and, you could end up renting longer than you expected in Stuart until you improve your score.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. 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 just that and often means you can't get credit. Some of the factors in calculating your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
- 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?
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 are based solely on your credit history. You'll need a score of at least 740 to get a decent interest rate. You'll still qualify for a mortgage with a lower score, but the interest accumulated over time could be more than double the amount of an individual with a better credit score.
We're used to working with all levels of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
You want a stronger score, but how do you get there? Improving your FICO score takes time. It can be hard to make a large-scale change in your number with small changes, 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. Here are some ways you can improve your credit score:
- Correct your credit report. If you discover 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 give extra care to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear 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 the majority of your debt transferred to one card.
- Apply for gas cards or department store credit. For those who have non-existent credit or below average credit, retail credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your credit. You should always beware of holding a large balance for more than a couple of months because these types of cards more than likely have a surprising interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts stay active. But, make sure you pay them off in one or two payments.
- Pay on time. Your FICO score plummets with every account that goes to collections. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the most reliable way to show that you're responsible enough 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. Know that when you're ready 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 Premier Realty Group, Inc., shopping for a mortgage 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 you can review all of your credit reports for free each year 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.