Tips on Increasing Your FICO Score for Home Buying
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. Saving 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 end up renting longer than you expected in Colorado Springs, Colorado until your FICO score is acceptable.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. In recent years, however, some people have seen their score lowered as a result of loss of employment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in reviewing your FICO score are:
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time ?
Lenders want to ensure that giving you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you are 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 decent interest rate. You'll still qualify for a mortgage loan with a lower score, but the interest accrued over the life of the loan could be more than double the amount of an individual with a near perfect credit score.
Staying on top of your FICO score is the best way to ease into owning a home. Call us at 7195286672 and we can help you get on the right track to the home of your dreams.
You want a higher score, but how do you get it? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, make sure you 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 one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to restore your credit this way, but it's the surest way to show that you're able to make payments to a bank.
- Ensure that your credit history is correct. 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.
- 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 maxed out and have the rest of your 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 bulk of your debt sitting on a single card.
- Chain store cards and service station cards. For those who have non-existent credit or low credit, retail credit cards and gas credit cards are ways to start your credit history, increase your spending limits and have a solid payment history, which will raise your credit. You must always avoid charging a high balance for more than a couple of months because these types of cards normally have a steeper interest rate.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Brian L. A. Wess, shopping for a mortgage 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.