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. To become a homeowner, you must consider your FICO score along with the type of lender for which you'll qualify in Burlington, North Carolina.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. 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 a decent interest rate. Some of the factors in determining your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
Lenders want to be positive 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. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get an acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over time could be more than double the amount of someone with a superior credit score.
We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
You want an improved score, but how do you get there? Building your FICO score takes time. It can be hard to make a significant change in your credit score with quick fixes, but your score can improve in a few years 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 tips:
- Use your credit. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.
- Keep up with payments. How often you're late with payments greatly affects your credit score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a bank.
- Ensure that your credit history is correct. If you find mistakes on your credit report, contact 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 want to avoid of having one card that is at the limit 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 taking up the balance one card.
- Retail cards and gas cards. For those who have no credit or below average credit, department store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You should always avoid keeping a large balance for too long because these types of cards usually have a higher interest rate.
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. Know that when it's time to apply for a loan to purchase a home, 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 David Massey Real Estate, the loan process is sure to go more smoothly so you, too, can become a homeowner.
Learn more about FICO scores at 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.