FICO - The First Step to Home Ownership

The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet starts the home buying process. Without an acceptable credit score, purchasing a house is more difficult and, you could end up renting longer than you expected in Prairieville until your score improves.

The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. Since we've experienced an economic downturn, however, some borrowers have seen their score drop dramatically because of job loss, closed 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 — How often do you make late payments?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of credit cards and loans?

When you pull your credit report, you'll discover 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 three of the bureaus.

Lenders want to make sure that allowing you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you'll be solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued over time could be more than double the amount of an individual with a superior 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 strategies to raise your 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 year or two by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:

• Pay on time. Delinquent payments drastically lower 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 restore your credit this way, but it's the surest way to show that you're able to make payments to a lender.
• Correct your credit report. If you find 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.
• Spread your debt around. At first, this doesn't seem like a good idea. But, you don't want to have 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 an even balance than to have the bulk of your debt sitting on a single card.
• Store cards and gas station cards. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to improve credit, increase your spending limits and keep up your payments, which will raise your credit. You should always avoid keeping a large balance for too long because these types of cards usually have a larger interest rate.
• Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.

Knowing the ways you can raise your FICO score, you can move toward becoming a homeowner. Remember that when it's time 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 Weichert, Realtors - Villar and Company, 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.