Tips on Raising Your FICO Score for Home Buying
The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet starts the home buying process. To make your goal of homeownership realized, considering your credit score is a must along with the type of loan for which you'll qualify in Spicewood.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people traditionally having a score of 600. Since we've experienced an economic downturn, however, some borrowers have seen their score lowered after 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 reviewing 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 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 risk. Your FICO 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 700 or higher to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued in the long run could be more than double the amount of an individual with a stronger FICO score.
Getting your credit in order is the best way to ease into buying a home. Call us at 8327233301 and we can help you get on the right track to the home of your dreams.
There are plans to increase your score. Improving your FICO score takes time. It can be difficult to make a large-scale change in your credit score with small changes, 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. You'll improve your credit score by using these helpful hints:
- Apply for gas cards or department store credit. For those who have no credit or low credit, store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your FICO score. You must always beware of keeping a large balance for more than a couple of months because these types of cards usually have a higher interest rate.
- Use your credit. 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, be sure to pay them off in no more than two or three payments.
- Keep up with payments. Delinquent payments instantly drop your credit score. It's one of the reasons 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 most reliable way to prove that you're able to make payments to a lender.
- 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.
- 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 at the limit 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 transferred to a single card.
Now that you're better informed 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 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 adverse effects on your credit score. With the help of HREG - Hollingsworth Real Estate Group @ Hollingsworth Center - Lee Hollingsworth, the loan application 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 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.