How's Your FICO?
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Without a reasonable credit score, entering into a loan for a house is more difficult and, you could end up renting longer than you expected in Miami until your score improves.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people usually have a score of 650, 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 a low score and that often means you can't get credit. Some of the pieces in deciding your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
When you pull your credit report, you'll find 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. You have a credit score with each of the bureaus.
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your credit score gives lenders an insight into what type of borrower you'd be based solely on your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. You'll still qualify for a mortgage with a lower score, but the interest accrued over time could be more than double that of someone with a higher credit score.
We're used to working with all levels of credit scores. Contact us and we can help you get on the right track to the home of your dreams.
There are plans to improve your score. Building your FICO score takes time. It can be hard to make a significant 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:
- Pay on time. Delinquent payments instantly lower your credit score. It's where people who have recently been unemployed see the biggest dip 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 responsible enough to make payments to a lender.
- Correct your credit report. If you find mistakes 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 seem like a good idea. But, you want to avoid of having 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 most of your debt transferred to one card.
- Department store cards and gas cards. For those who have no credit or low credit, store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You must always avoid charging a large balance for more than a couple of billing cycles because these types of cards usually have a higher interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, 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.
Knowing the ways you can raise your FICO score, you can move toward becoming a homeowner. 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, shopping for a mortgage is sure to go more smoothly 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.