Raising Your FICO Score for Home buyers
Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet starts the home buying process. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of lender for which you'll qualify in Covina, California.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with most people traditionally having a score of 600. With the change in the economy, however, some people have seen their score drop by hundreds of points after loss of employment, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding your FICO score include:
- Credit Inquiries — Do you have too many open accounts?
- 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 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 systems 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 make sure that giving you a loan isn't a risk for them. 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 700 to get a satisfactory interest rate. You'll still get approved for a mortgage with a lower score, but the interest accumulated in the long run could be more than double that of an individual having a superior credit score.
We're used to working with all tiers of credit history. Call us at 6266087310 and we can help you get on the right track to the home of your dreams.
How do you obtain a stronger score? 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 year or two by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.
- Stay on top of payments. Payment history is a huge factor in your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to prove that you're able to make payments to a lender.
- Ensure that your credit history is correct. If you discover 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.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have the most of your debt transferred to a single card.
- Apply for service station cards or chain store credit. For those who have non-existent credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to get credit, increase your spending limits and stay on top of your payments, which will raise your credit. You should always beware of keeping a large balance for more than a couple of billing cycles because these types of cards usually have a surprising interest rate.
Knowing the methods you can use to raise your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when it's time 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 In Home Realty, 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 review your credit history for free 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.