How's Your Score?
Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. To become a homeowner, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Miami, Florida.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with most people traditionally having a score of 600. Since we've experienced an economic downturn, however, some people have seen their score drop dramatically as a result of unemployment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in reviewing your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many months do you make late payments?
- 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?
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 are solely because of 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 get approved for a mortgage with a lower score, but the interest accrued in the long run could be more than double that of someone having a superior credit score.
We're used to working with all tiers of FICO scores. Call us at (786) 388-0110 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? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with quick fixes, but your score can improve in a year 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 tips:
- Keep your cards active. Whether you have older cards, or are just getting started with credit, 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.
- Keep up with payments. How often you're late with payments greatly affects 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 restore your credit this way, but it's the surest way to prove that you're able to make payments to a lender.
- Ensure that your credit history is correct. If you discover 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 pay extra attention 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 maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have the bulk of your debt taking up the balance one card.
- Apply for service station cards or store credit. For those who have non-existent credit or below average credit, retail credit cards and gas credit cards are ways to start your credit history, increase your credit limits and keep up your payments, which will raise your FICO score. You should always beware of charging a large balance for more than a couple of months because these types of cards normally have a steeper interest rate.
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 credit inquiries within a two-week window to avoid a negative mark on your credit score. With the help of Delphi Investment Realty, the loan 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.