Raising Your FICO Score for Home Buying

The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet starts the home buying process. To become a homeowner, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Covina.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people normally having a score of 650. Since we've experienced an economic downturn, however, some borrowers have seen their score drop dramatically after job loss, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in summing up your FICO score are:

• Payment History — Do you pay your bills on time each month?
• 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 credit cards and loans?

In reviewing your credit history, you'll see 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 each of the bureaus.

Lenders want to ensure that allowing you a loan is a safe move. 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 satisfactory interest rate. You can get approved for a mortgage with a lower score, but the interest accrued in the long run could be more than double the amount of an individual with a higher FICO score.

We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.

There are ways to improve your score. Improving your FICO score takes time. It can be hard to make a significant stride change in your credit score with quick fixes, but your score can improve in a few years by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:

• Ensure that your credit history is correct. 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 seem like a good idea. But, you don't want to have 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 about 30% of their credit limit than to have the most of your debt sitting on one card.
• Department store cards and gas cards. For those who have non-existent credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to repair credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You should always beware of keeping a high balance for more than a couple of billing cycles because these types of cards more than likely have a steeper interest rate.
• 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 stay active. But, pay them off in no more than two or three payments.
• Stay on top of payments. How often you're late with payments greatly affects your credit score. It's one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the surest way to show that you're responsible enough to make payments to a lender.

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. Remember that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging 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.

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.