Scoring Your Credit
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. Without a reasonable credit score, purchasing a house is harder and, you could end up renting longer than you expected in North Port until your FICO score is acceptable.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. Job loss has been common in the last few years, but 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 pieces in reviewing your FICO score are:
- 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 credit cards and loans?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO score gives lenders a view of what type of borrower you are based solely on your credit history. You'll need a score of at least 700 to get a acceptable interest rate. You can qualify for a loan with a lower score, but the interest paid in the long run could be more than double that of someone having a stronger FICO score.
Improving your credit is the best way to ease into purchasing a home. Call us at (941) 875-1000 and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be rare to make a significant stride change in your FICO score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. You'll improve your credit score by using these pointers:
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, make sure you pay them off in one or two payments.
- Stay on top of payments. Payment history is a big factor in your credit 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 with payment history, but it's the surest way to show that you're able to make payments to a bank.
- Correct your credit report. If you discover mistakes 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.
- Even out your debt. At first, this doesn't seem like a good idea. But, you don't want to have one card that is at the maximum 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 bulk of your debt taking up the balance a single card.
- Apply for gas station cards or department store credit. For those who have no credit or below average credit, store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You should always beware of holding a high balance for too long because these types of cards usually have a steeper interest rate.
Knowing the methods you can use to raise your FICO score, you can move toward becoming a homeowner. Keep in mind that when you're ready to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Century 21 Almar & Associates, the loan process is sure to go more smoothly so you, too, can achieve home ownership.
Learn more about FICO scores at 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.