Improving Your FICO Score for Home Buying
You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. To make your goal of homeownership realized, you must consider your FICO score along with the type of loan for which you'll qualify in Newport Beach, California.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, 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 a loan. Some of the pieces in calculating your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time ?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
In reviewing your credit history, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each bureau.
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 credit score gives lenders an insight into what type of borrower you are based solely on 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. If your score is lower, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of an individual having a superior credit score.
Getting your credit in order is the best way to ease into owning a home. Call me at 949-478-2892 and I can help you get on the right track to the home of your dreams.
How do you boost your credit score? Building your FICO score takes time. It can be difficult 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 your credit wisely. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Keep up with payments. Payment history is a big factor in your FICO score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable way to prove that you're able to make payments to a bank.
- Correct your credit report. 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 give extra care to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't sound like a good idea. But, you steer clear of having one card that is at the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at a lower balance than to have all of your debt transferred to a single card.
- Store cards and gas station cards. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and have a solid payment history, which will raise your credit. You must always beware of keeping a high balance for too long because these types of cards more than likely have a surprising interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts stay active. But, pay them off in one or two payments.
Now that you're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Know 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 damaging your credit score. With the help of Marovish Properties, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
I work with all tiers of credit and can help you get back into home ownership with the best lender for you. E-mail me at firstname.lastname@example.org or call 949-478-2892 for additional information.