Tips on Increasing Your FICO Score for Home Buying

The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. Without a reasonable FICO score, buying a house is harder and, you could find yourself renting for another couple of years in Oviedo, Florida until your score improves.

A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people traditionally having a score of 600. 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 a decent interest rate. Some of the pieces in reviewing 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 loans and credit cards?
• Payment History — Do you pay your bills on time ?

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 systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each bureau.

Lenders want to make sure that giving you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you'd be based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 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 having a near perfect credit score.

We're used to working with all levels 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.

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 credit score with quick fixes, but your score can improve in a few years by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:

• Use your credit. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.
• Pay on time. How often you're late with payments greatly affects your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the most reliable way to prove that you're responsible enough to make payments to a lender.
• Ensure that your credit history is correct. If you discover 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.
• Even out your debt. At first, this doesn't seem 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 all of your debt transferred to one card.
• Apply for gas cards or store credit. For those who have non-existent credit or less-than-stellar credit, store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your credit. You must always avoid maintaining a high balance for too long because these types of cards traditionally have a larger interest rate.

Knowing the methods you can use to build up your FICO score, you can move toward becoming a homeowner. Remember that when it's time to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of Commercial, Homes & Land, Inc., shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.

Learn more about FICO scores at myFICO.com, Fair Isaac's informational site and review your credit history for free 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.