Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. Without an above average FICO score, purchasing a house is more difficult and, you could end up renting longer than you expected in Prairieville, Louisiana until your score improves.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people normally having a score of 600. Even though more people these days are experiencing job loss and delinquent credit cards, 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 decent interest rate. Some of the pieces in deciding 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 many late payments have you made?
Lenders want to make sure that giving you a loan is a safe move. Your FICO score gives lenders insight into what type of borrower you are solely because of your credit history. You'll need a score of at least 700 to get a decent interest rate. You can qualify for a mortgage loan with a lower score, but the interest accumulated over time could be more than double that of an individual with a superior FICO score.
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Improving your FICO is the best way to ease into purchasing a home. Contact us and we can help you get on the right track to the home of your dreams.
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You want a stronger score, but how do you get there? Improving your FICO score takes time. At Villar & Co. Real Estate, we know it's hard to make a large-scale change in your FICO score with quick fixes, but your score can improve in a few years by keeping tabs 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 your cards active. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards to make sure your accounts stay active. 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 FICO 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 show 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 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 seem like a good idea. But, you don't want to have one card that is at the limit 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 the bulk of your debt sitting on a single card.
- Department Store cards and gas cards. For those who have non-existent credit or below average credit, department 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 FICO score. Just beware of keeping a large balance for too long because these types of cards traditionally have a surprisingly high interest rate.
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Knowing the methods you can use raise your FICO score, you're one step closer to becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Villar & Co. Real Estate, shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.
Learn more about FICO scores at www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.
At Villar & Co. Real Estate we work with all levels of credit scores and can help you settle into home ownership with the best lending insitution for you. E-mail us at sandy@villarrealestate.com or call 225-744-2610 for more information.
