FICO - The First Step to Owning
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. Putting back your money for a down payment is great, 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 until your score improves.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. Job loss has been common in the last few years, but 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 extended to you in the form of a mortgage loan. Some of the pieces in deciding your FICO score are:
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How often do you make late payments?
- 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 credit score gives lenders a view of what type of borrower you are solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get a decent interest rate. You can qualify for a mortgage loan with a lower score, but the interest accrued over time could be more than double the amount of an individual having a higher FICO score.
Improving your FICO score is the first step in owning a home. Call us at 7195286672 and we can help you get on the right track to the home of your dreams.
There are plans to raise your score. Improving your FICO score takes time. It can be difficult to make a significant change in your FICO score with quick fixes, but your score can improve in a year or two by keeping tabs your credit report and by wisely using credit. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Keep up with payments. How often you're late with payments greatly affects your credit score. It's where people who have recently been unemployed see the biggest hit 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 able to make payments to a bank.
- Ensure that your credit history is correct. If you find mistakes on your credit report, write to 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 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 about 30% of their credit limit than to have the most of your debt transferred to one card.
- Apply for service station cards or retail credit. For those who have non-existent credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to repair credit, increase your credit limits and keep up your payments, which will raise your credit. You should always beware of carrying a large balance for more than a couple of months because these types of cards normally have a higher interest rate.
- Keep your cards in rotation. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.
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. Know that when you're ready to apply for a loan to purchase a house, 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.