How's Your Credit?
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins with your finances. Without an acceptable credit score, purchasing a house is more difficult and, you could end up renting for another couple of years in Fort Walton Beach until your FICO score is acceptable.
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. Since we've experienced an economic downturn, however, some borrowers have seen their score lowered as a result of loss of employment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in summing up your FICO score are:
- 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?
- 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?
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your credit score gives lenders a view of what type of borrower you are based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get a decent interest rate. You can qualify for a mortgage loan with a lower score, but the interest paid over time could be more than double that of an individual having a stronger FICO score.
We're used to working with all tiers of credit scores. Call us at 8505856466 and we can help you get on the right track to the home of your dreams.
You want a stronger score, but how do you get there? Building your FICO score takes time. It can be difficult to make a large-scale change in your number 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:
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.
- Keep up with payments. Your credit score plummets with every account that goes to collections. 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 build up your credit this way, but it's the most reliable way to prove that you're able to make payments to a bank.
- Correct your credit report. 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.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is holding the maximum 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 transferred to a single card.
- Store 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 obtain credit, increase your spending limits and have a solid payment history, which will raise your credit. You must always beware of carrying a large balance for too long because these types of cards more than likely have a steeper interest rate.
Knowing the ways you can raise your credit 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 Coast to Coast Property Brokers, 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 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.