How's Your Score?

Choosing a lender isn't the first step in becoming a homeowner. 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 find yourself renting longer than you expected in Colorado Springs, Colorado until you build up your score.

A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people normally having a score of 600. In recent years, however, some people have seen their score drop by hundreds of points because of underemployment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in summing up your FICO score include:

• Types of Credit — Do you have a healthy mix of loans and credit cards?
• 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?
• Credit Inquiries — How many times has your credit history been accessed by someone other than you?

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'll still qualify for a mortgage with a lower score, but the interest paid over the life of the loan could be more than double the amount of someone with a superior credit score.

Getting your credit in order is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.

You want a better score, but how do you get there? Improving your FICO score takes time. It can be difficult to make a large-scale change in your number with quick fixes, 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 pointers:

• Stay on top of payments. Delinquent payments instantly drop your credit 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 build up 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 incorrect items 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 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 less than 40% of their credit limit than to have all of your debt transferred to a single card.
• Department store cards and gas station cards. For those who have no credit or low credit, chain store credit cards and gas credit cards are ways to get credit, increase your credit limits and keep up your payments, which will raise your FICO score. You should always avoid maintaining a high balance for more than a couple of billing cycles because these types of cards more than likely have a larger interest rate.
• Keep your cards active. 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.

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. Keep in mind that when you're ready 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 can be a stress-free experience so you, too, can become a homeowner.

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.