Scoring Your Credit - How's Your FICO?
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet starts the home buying process. To become a homeowner, considering your credit score is a must along with the type of loan for which you'll qualify in the Lake Norman Area.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 600, but scores are tiered from 300 to 850. 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 just that and often means you can't get credit extended to you in the form of a mortgage loan. Some of the pieces in summing up 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 loans and credit cards?
- Payment History — Do you pay your bills on time each month?
- Credit to Debt Ratio — How much do you owe versus your available credit?
Lenders want to ensure that allowing you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you'll 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 an acceptable interest rate. You'll still qualify for a mortgage with a lower score, but the interest accrued in the long run could be more than double the amount of someone with a near perfect credit score.
I'm used to working with all tiers of credit history. Call me at 704.634.1061 and I 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 difficult to make a large-scale change in your FICO score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Spread your debt around. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have the bulk of your debt taking up the balance a single card.
- Apply for service station cards or chain store credit. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always beware of holding a large balance for too long because these types of cards traditionally have a higher interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Pay on time. Delinquent payments drastically lower 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 rebuild your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a lender.
- Correct your credit report. If you find incorrect items on your credit report, contact 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.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Remember that when it's time 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 Southern Homes of the Carolinas, the loan process is sure to go more smoothly 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.
I won't judge you based on your credit scores and can help you get back into home ownership with the right lender for you. E-mail me at firstname.lastname@example.org or call 704.634.1061 for more information.