Scoring Your Credit - How's Your FICO?
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. 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 loan for which you'll qualify in Miami, Florida.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, but scores range from 300 to 850. In recent years, however, some people have seen their score drop by hundreds of points as a result of loss of employment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in determining your FICO score include:
- 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 ensure that allowing you a loan isn't a risk for them. 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 a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of someone having a better credit score.
We're used to working with all levels of credit history. Call us at (786) 388-0110 and we can help you get on the right track to the home of your dreams.
How do you get a higher score? Improving your FICO score takes time. It can be difficult to make a significant change in your FICO score with quick fixes, but your score can improve in a few years 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:
- Keep your cards in rotation. 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, make sure you pay them off in one or two payments.
- Keep up with payments. Payment history is a big factor in your FICO score. It's where people who have recently experienced job loss 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 able to make payments to a lender.
- Correct your credit report. If you discover 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't sound like a good idea. But, you don't want to have one card that is holding the maximum and have your remaining 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 majority of your debt sitting on a single card.
- Chain store cards and service station cards. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to repair credit, increase your spending limits and keep up your payments, which will raise your credit. You should always beware of maintaining a high balance for more than a couple of billing cycles because these types of cards normally have a higher 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. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid adverse effects on your credit score. With the help of Delphi Investment Realty, 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 you can review all of your credit reports for free each year 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.