Increasing Your FICO Score for Home Buying
The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process starts with your finances. Putting back your money for a down payment is great, but if you don't have an acceptable credit score to reinforce it, you could end up renting longer than you expected in Prairieville, Louisiana until your FICO score is acceptable.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people usually have a score of 650, but scores range from 300 to 850. 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 include:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- 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?
Lenders want to be positive that giving you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you'll be 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. You'll still get approved for a mortgage loan with a lower score, but the interest accrued in the long run could be more than double the amount of an individual having a higher credit score.
Improving your credit score is the first step in owning a home. Call us at 2257442610 and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be hard to make a significant stride change in your number with small changes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these pointers:
- 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 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 don't want to have one card that is holding the maximum 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 taking up the balance one card.
- Apply for gas station cards or retail credit. For those who have no credit or low credit, chain store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You must always beware of maintaining a large balance for too long because these types of cards normally have a surprisingly high interest rate.
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Keep up with payments. Delinquent payments drastically lower your credit score. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to prove that you're able to make payments to a lender.
Knowing the methods you can use to raise your credit 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 lender applications 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 is sure to go more smoothly so you, too, can achieve home ownership.
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.