Tips on Raising Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Putting back your money for a down payment is a good idea, but if you don't have an acceptable credit score to back it up, you could find yourself renting longer than you expected in Swainsboro until you build up your score.
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. Since we've experienced an economic downturn, however, some borrowers have seen their score lowered because of job loss, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in summing up 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 loans and credit cards?
- Payment History — How many months do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
Lenders want to be positive that allowing you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you are solely because of your credit history. You'll need a score of at least 740 to get a acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of an individual having a higher credit score.
Improving your credit is the first step in buying a home. Call me at 478-237-7292 and I can help you get on the right track to the home of your dreams.
How do you obtain a better score? Improving your FICO score takes time. It can be hard to make a large-scale change in your FICO score with small changes, but your score can improve in a year 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 methods to improve your credit score:
- Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at a lower balance than to have the majority of your debt sitting on a single card.
- Apply for gas cards or chain store credit. For those who have non-existent credit or less-than-stellar credit, store credit cards and gas credit cards are ways to start 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 high balance for too long because these types of cards usually have a larger interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, pay them off in no more than two or three payments.
- Stay on top of payments. Payment history is a huge factor in your FICO score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to prove that you're responsible enough to make payments to a bank.
- Correct your credit report. If you find incorrect items on your credit report, write to 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 pay extra attention to make sure the activity reported is correct.
Now that you're better informed 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 applications within a two-week window to avoid a negative mark on your credit score. With the help of DRB Realty & Properties LLC, the loan application process can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at www.myFICO.com, Fair Isaac's informational site and review your credit history for free at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
I won't judge you based on your credit scores and can help you step into home ownership with the right lender for you. E-mail me at firstname.lastname@example.org or call 478-237-7292 for more information.