Home buyer's Guide to Better Credit
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To become a homeowner, you must consider your FICO score along with the type of lender for which you'll qualify in Oviedo, Florida.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people traditionally have a score of 600, but scores range from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get credit extended to you via a mortgage loan. Some of the pieces 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 — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many late payments have you made?
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 models to calculate 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 problem. Your credit score gives lenders an insight into what type of borrower you'll be solely because of your credit history. You'll need a score of at least 740 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued in the long run could be more than double that of someone with a stronger FICO score.
We're used to working with all tiers of FICO scores. Call us at (407) 366-1333 and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get there? 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 credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Department store cards and gas cards. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to start your credit history, increase your spending limits and stay on top of your payments, which will raise your credit. You should always avoid charging a high balance for too long because these types of cards usually have a higher interest rate.
- Keep your cards in rotation. 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 one or two payments.
- Stay on top of payments. Your credit score plummets with each account that goes to collections. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the surest way to prove that you're able to make payments to a bank.
- Correct your credit report. If you find incorrect items 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 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 about 20% of their credit limit than to have the bulk of your debt sitting on a single card.
Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Know that when you're ready to apply for a loan to purchase a house, 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., shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
To learn more, visit 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.