Scoring Your Credit

Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. To make your goal of homeownership realized, considering your credit score is a must along with the type of loan for which you'll qualify in Prairieville, Louisiana.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. In recent years, however, some borrowers have seen their score drop dramatically after job loss, closed credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in summing up your FICO score are:

• 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?
• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — How many months do you make late payments?

When you pull your credit report, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. As a result, you have three scores, one for each bureau.

Lenders want to be positive that giving you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you are solely because of 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 decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of an individual with a better FICO score.

Staying on top of your FICO score is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.

There are ways to boost your score. Building your FICO score takes time. It can be difficult to make a large-scale change in your number with quick fixes, but your score can improve in a year by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:

• Don't let your cards get dusty. 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, make sure you pay them off in no more than two or three payments.
• Keep up with payments. Your credit score plummets with each account that goes to collections. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to rebuild 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.
• Spread your debt around. At first, this doesn't sound like a good idea. But, you want to avoid of having 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 smaller balance than to have all of your debt taking up the balance one card.
• Apply for gas cards or chain store credit. For those who have non-existent credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and have a solid payment history, which will raise your FICO score. You should always avoid carrying a high balance for more than a couple of billing cycles because these types of cards more than likely have a higher interest rate.

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 applications within a two-week window to avoid a negative mark on your credit score. With the help of Villar and Company Real Estate, the loan application process is sure to go more smoothly so you, too, can become a homeowner.

Learn more about FICO scores at myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.