Increasing Your FICO Score for Home Ownership
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins and ends with your finances. To make your goal of homeownership realized, considering your credit score is a must along with the type of lender for which you'll qualify in Oviedo.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 650. With the change in the economy, however, some people have seen their score lowered after underemployment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in deciding your FICO score are:
- Credit Inquiries — Do you have too many open accounts?
- 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?
In reviewing your credit history, 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 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 each 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 problem. Your FICO score gives lenders an insight into 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. You'll still qualify for a mortgage with a lower score, but the interest paid over time could be more than double the amount of an individual having a stronger FICO 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 plans to improve your score. Building your FICO score takes time. It can be hard to make a significant stride change in your credit score with quick fixes, but your score can improve in a year or two by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Retail cards and service station cards. For those who have no credit or less-than-stellar credit, retail 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 must always avoid keeping a high balance for more than a couple of months because these types of cards usually have a surprising interest rate.
- Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts stay active. But, make sure you pay them off in no more than two or three payments.
- Stay on top of payments. Late payments kill 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 with payment history, but it's the surest way to show 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 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 maximum and have your remaining cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have the majority of your debt transferred to a single card.
Knowing the methods you can use to improve your credit score, you're one step closer to 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 a negative mark on your credit score. With the help of Commercial, Homes & Land, Inc., the loan application process can be a stress-free experience so you, too, can become a homeowner.
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.