Raising Your FICO Score for Home buyers
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet starts the home buying process. Without a reasonable FICO score, purchasing a house is harder and, you could end up renting for another couple of years in Covina, California until your FICO score is acceptable.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 650, but scores range from 300 to 850. Job loss has been common in the last few years, but 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 pieces in calculating your FICO score are:
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time each month?
Lenders want to be positive that giving you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a acceptable interest rate. You can get approved for a mortgage loan with a lower score, but the interest accumulated over the life of the loan could be more than double the amount of an individual with a near perfect credit score.
We're used to working with all tiers of credit history. Contact us and we can help you get on the right track to the home of your dreams.
How do you get a higher score? Improving your FICO score takes time. It can be rare to make a large-scale change in your number with small changes, but your score can improve in a few years by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:
- Use your credit. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, be sure to pay them off in one or two payments.
- Stay on top of 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 this way, but it's the surest way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. If you find 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 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 steer clear of having one card that is holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have the most of your debt taking up the balance one card.
- Department store cards and gas station cards. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and have a solid payment history, which will raise your FICO score. You must always beware of keeping a high balance for too long because these types of cards traditionally have a higher interest rate.
Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Keep in mind that when you're ready to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of In Home Realty, the loan process can be a stress-free experience so you, too, can achieve home ownership.
Get more information by visiting 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.