Ways to Improve Your FICO Score for Home Buying

The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. Without an above average credit score, buying a house is more difficult and, you could find yourself renting for another couple of years in Covina until your FICO score is acceptable.

The Fair Isaac Company calculates 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 650. In recent years, however, some borrowers have seen their score drop by hundreds of points because of unemployment, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in reviewing your FICO score are:

• 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 — How many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus your available credit?

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO score gives lenders an insight into what type of borrower you'd be solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get a satisfactory interest rate. You'll still qualify for a mortgage loan with a lower score, but the interest paid over the life of the loan could be more than double the amount of an individual having a near perfect FICO score.

Improving your credit score is the first step in owning a home. Call us at (626) 608-7310 and we can help you get on the right track to the home of your dreams.

You want a better score, but how do you get there? Building your FICO score takes time. It can be difficult to make a significant change in your number 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. You'll improve your credit score by using these pointers:

• Keep your cards active. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.
• Keep up with payments. Your credit score plummets with every account that goes to collections. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
• Correct your credit report. If you find mistakes on your credit report, contact 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 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 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 sitting on one card.
• Apply for gas station cards or retail credit. For those who have non-existent credit or below average credit, store credit cards and gas credit cards are ways to repair credit, increase your credit limits and keep up your payments, which will raise your FICO score. You should always avoid charging a large balance for too long because these types of cards usually have a larger interest rate.

Knowing the ways you can build up your FICO score, you can move toward 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 In Home Realty, the loan application 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.