How's Your Credit?

The road to home ownership 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 for another couple of years in Prairieville until your score improves.

The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people usually have a score of 600, but scores range from 300 to 850. 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 credit extended to you via a mortgage loan. Some of the factors in deciding your FICO score include:

• 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?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

When you pull your credit report, you'll see 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. You have a credit score with all of the bureaus.

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your credit score gives lenders a view of what type of borrower you'd be solely because of your credit history. You'll need a score of at least 700 to get a acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double the amount of an individual having a higher credit score.

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

There are methods to increase your score. Improving your FICO score takes time. It can be difficult to make a significant stride change in your number with small changes, but your score can improve in a year or two by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:

• Pay on time. Your FICO score plummets with every account that goes to collections. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to build up your credit this way, but it's the most reliable way to prove that you're able to make payments to a lender.
• Correct your credit report. If you discover mistakes 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.
• Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having 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 a smaller balance than to have the majority of your debt sitting on one card.
• Department store cards and gas cards. For those who have non-existent credit or below average credit, store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and keep up your payments, which will raise your FICO score. You should always beware of maintaining a large balance for more than a couple of billing cycles because these types of cards traditionally have a higher interest rate.
• Keep your cards in rotation. 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, pay them off in one or two payments.

Knowing the methods you can use to build up 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 a negative mark on your credit score. With the help of Weichert, Realtors - Villar and Company, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.

To learn more, visit 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.