Increasing Your FICO Score for Home Ownership
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins and ends with your finances. To make your goal of homeownership realized, considering your credit score is a must along with the type of lender for which you'll qualify in Victorville, California.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. With the change in the economy, however, some people have seen their score drop dramatically as a result of unemployment, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in calculating your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- 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 — Do you have too many open accounts?
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO score gives lenders an insight into what type of borrower you are solely because of your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. You can get approved for a loan with a lower score, but the interest accrued in the long run could be more than double the amount of someone having a near perfect FICO score.
We're used to working with all levels of credit history. Contact us and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get it? Building 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 by keeping tabs 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:
- Apply for gas cards or retail credit. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your FICO score. You must always avoid carrying a large balance for too long because these types of cards usually have a higher 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 so that your accounts stay active. But, pay them off in one or two payments.
- Pay on time. Late payments hurt your credit history. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you find 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 steer clear 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 a lower balance than to have the majority 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 steps to homeownership, and that is improving your FICO score. Know that when you're ready 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 Wiest Realty, Inc., shopping for a mortgage can be a stress-free experience 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.