Tips on Increasing Your FICO Score for Home Buying

Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you don't have an acceptable credit score to reinforce it, you could end up renting longer than you expected in Covina until you improve your score.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. Since we've experienced an economic downturn, however, some people have seen their score drop dramatically because of loss of employment, 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 include:

• 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 — How often do you make late payments?

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'll be based solely on your credit history. You'll need a score of at least 740 to get a acceptable interest rate. You'll still get approved for a loan with a lower score, but the interest accumulated over time could be more than double that of an individual having a stronger FICO score.

Improving your credit score is the first step in owning a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you obtain a better score? Building your FICO score takes time. It can be rare to make a significant change in your number with quick fixes, but your score can improve in a few years by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have the most of your debt sitting on one card.
• Apply for gas station cards or store credit. For those who have no credit or low credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and have a solid payment history, which will raise your credit. You must always beware of maintaining a large balance for too long because these types of cards more than likely have a larger interest rate.
• Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. 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 experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit this way, but it's the most reliable way to show that you're able to make payments to a lender.
• Ensure that your credit history is correct. If you discover 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 pay extra attention to make sure the activity reported is correct.

Knowing the methods you can use to build up your credit score, you can move toward becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging 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.