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. In reality, the home buying process starts and ends with your finances. To realize your goal of owning a home, you must consider your FICO score along with the type of lender for which you'll qualify in Miami, Florida.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people traditionally having a score of 650. With the change in the economy, however, some borrowers have seen their score drop dramatically as a result of job loss, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in summing up your FICO score include:
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
- 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 your available credit?
Lenders want to be positive that allowing you a loan isn't a risk for them. Your credit score gives lenders an insight into what type of borrower you'll be solely because of your credit history. You'll need a score of at least 700 to get a decent 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 better credit 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.
How do you obtain a higher score? Building your FICO score takes time. It can be hard to make a significant stride change in your number with small changes, but your score can improve in a year or two 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 pointers:
- 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 your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have the bulk of your debt transferred to one card.
- Apply for gas cards or chain store credit. For those who have non-existent credit or below average credit, store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and stay on top of your payments, which will raise your FICO score. You should always avoid charging a large balance for too long because these types of cards normally have a higher interest rate.
- 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, pay them off in no more than two or three payments.
- Pay on time. 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 build up your credit this way, but it's the surest way to show that you're able to make payments to a lender.
- Ensure that your credit history is correct. If you find incorrect items 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.
Knowing the ways you can improve your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid a negative mark on your credit score. With the help of Delphi Investment Realty, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.
Get more information by visiting 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.