Ways to Raise Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you lack an acceptable credit score to back it up, you could find yourself renting for another couple of years in Metter until your FICO score is acceptable.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people normally having a score of 600. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is a low score and that often means you can't get credit. Some of the pieces in reviewing your FICO score include:
- Payment History — How often do you make late payments?
- 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?
In reviewing your credit history, 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 determine 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 scoring model.
Lenders want to ensure that giving you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you are based solely on 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 accumulated in the long run could be more than double the amount of someone with a near perfect credit 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 strategies to boost your score. Improving your FICO score takes time. It can be difficult to make a significant change in your FICO score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Use your credit. 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 stay active. But, be sure to pay them off in one or two payments.
- Pay on time. Delinquent payments drastically drop your credit score. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, 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 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.
- Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having one card that is at 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 all of your debt transferred to a single card.
- Chain Store cards and gas station cards. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to start your credit history, increase your spending limits and keep up your payments, which will raise your credit. You should always beware of keeping a large balance for more than a couple of months because these types of cards usually have a surprising interest rate.
Knowing the methods you can use to build up your FICO score, you can move toward becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Jones Realty & Auction Company, Inc., shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
We work with all levels of credit scores and can help you get back into home ownership with the right lending insitution for you. E-mail us at Training@PipelineROI.com or call (912) 685-5045 for more information.