Scoring Your FICO
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. To become a homeowner, considering your credit score is a must along with the type of lender for which you'll qualify in Milton, Massachusetts.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 650. Even though more people these days are experiencing job loss and delinquent credit cards, FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get credit extended to you via a mortgage loan. Some of the pieces in deciding your FICO score include:
- Payment History — Do you pay your bills on time every month?
- 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?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
In reviewing your credit history, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each scoring model.
Lenders want to make sure that allowing you a loan is a safe move. Your credit score gives lenders a view of what type of borrower you'll be 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. If your score is lower, you can still qualify for a loan, but the interest paid over the life of the loan could be more than double the amount of someone with a better FICO score.
We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be rare to make a significant stride change in your number with small changes, but your score can improve in a year or two by monitoring 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. Here are some ways you can improve your credit score:
- Ensure that your credit history is correct. If you discover 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.
- Spread your debt around. 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 majority of your debt taking up the balance one card.
- Apply for gas cards or chain store credit. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to repair credit, increase your spending limits and keep up your payments, which will raise your FICO score. You must always beware of carrying a large balance for more than a couple of months because these types of cards traditionally have a steeper interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts stay active. But, make sure you pay them off in one or two payments.
- Keep up with payments. Delinquent payments drastically drop your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
Knowing the methods you can use to improve your credit score, you're one step closer to becoming a homeowner. Keep in mind 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 Kelley Rege Properties INC., the loan application process can be a stress-free experience so you, too, can achieve home ownership.
Get more information by visiting myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.