Raising Your FICO Score for Home Ownership
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To realize your goal of owning a home, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Burlington.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 650. 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 determining your FICO score are:
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
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 an insight into what type of borrower you'd be based solely on your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. You'll still qualify for a loan with a lower score, but the interest accrued over the life of the loan could be more than double the amount of someone with a better credit score.
We're used to working with all tiers of FICO scores. Call us at (336) 226-9374 and we can help you get on the right track to the home of your dreams.
There are methods to boost your score. Improving your FICO score takes time. It can be difficult to make a large-scale change in your FICO score with small changes, but your score can improve in a year or two by monitoring your credit report and by wisely using credit. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Retail cards and service station cards. For those who have no credit or below average credit, chain store credit cards and gas credit cards are ways to repair credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always beware of charging a large balance for more than a couple of billing cycles because these types of cards more than likely have a surprisingly high interest rate.
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, be sure to 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. How often you're late with payments greatly affects your credit score. 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 surest way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. If you discover 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.
- 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 25% of their credit limit than to have all of your debt transferred to a single card.
Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of David Massey Real Estate, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
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.