Tips on Improving Your FICO Score for Home Buying
You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet begins the home buying process. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of lender for which you'll qualify in Fort Walton Beach, Florida.
A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 650, but scores are tiered 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 factors in calculating your FICO score are:
- 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 often do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
Lenders want to be positive that giving you a loan isn't a risk for them. Your FICO score gives lenders an insight into what type of borrower you'll be solely because of 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. You'll still qualify for a mortgage with a lower score, but the interest paid in the long run could be more than double the amount of an individual having a superior credit score.
Getting your credit in order is the first step in owning a home. Call us at 8505856466 and we can help you get on the right track to the home of your dreams.
How do you get a better score? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with quick fixes, but your score can improve in a year 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 pointers:
- Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at a lower balance than to have the bulk of your debt sitting on a single card.
- Apply for service station cards or department store credit. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and have a solid payment history, which will raise your FICO score. You must always avoid maintaining a large balance for too long because these types of cards more than likely have a surprising interest rate.
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, pay them off in no more than two or three payments.
- Keep up with payments. Delinquent payments instantly lower your credit score. It's where people who have recently been unemployed see the biggest dip 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 responsible enough to make payments to a lender.
- Correct your credit report. If you find 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 give extra care to make sure the activity reported is correct.
Knowing the methods you can use to raise your FICO score, you can move toward becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Coast to Coast Property Brokers, 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.