Scoring Your Credit - How's Your Credit Score

Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. Saving your money for a down payment is a good idea, but if you lack a strong credit score to reinforce it, you could find yourself renting for another couple of years in Miami, Florida until your score improves.

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. 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 reviewing your FICO score include:

• Payment History — How often do you make late payments?
• Credit to Debt Ratio — How much do you owe versus your available credit?
• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of loans and credit cards?

When you pull your credit report, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each scoring model.

Lenders want to ensure that allowing you a loan is a safe move. Your credit score gives lenders a view of what type of borrower you'll be 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 a decent interest rate. You can qualify for a loan with a lower score, but the interest accumulated over the life of the loan could be more than double the amount of someone with a higher credit score.

Improving your credit is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you boost your credit score? Building your FICO score takes time. It can be difficult to make a large-scale change in your number with quick fixes, but your score can improve in a few years by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:

• Keep your cards in rotation. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts stay active. But, be sure to pay them off in one or two payments.
• Stay on top of payments. Payment history is a big factor in your FICO score. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to build up your credit with payment history, 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 find 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 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 limit and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the most of your debt transferred to a single card.
• Apply for service station cards or store credit. For those who have no credit or below average credit, chain store credit cards and gas credit cards are ways to get credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always avoid keeping a high balance for more than a couple of months because these types of cards usually have a surprising 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. Remember that when it's time to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Delphi Investment Realty, the loan application process can be a stress-free experience so you, too, can become a homeowner.

Get more information by visiting 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.