Scoring Your Credit - How's Your FICO?
The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of lender for which you'll qualify in Milton, Massachusetts.
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 normally having a score of 600. 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 a loan. Some of the factors in determining your FICO score include:
- Payment History — How many months do you make late payments?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- 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?
Lenders want to be positive that giving you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over time could be more than double the amount of an individual having a better FICO score.
Staying on top of your FICO score is the first step in purchasing a home. Contact us 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 there? Building your FICO score takes time. It can be rare to make a large-scale change in your number with quick fixes, but your score can improve in a few years by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:
- Pay on time. Delinquent payments drastically lower 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 rebuild your credit this way, but it's the most reliable way to prove that you're able to make payments to a bank.
- Correct your credit report. If you find incorrect items 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 pay extra attention to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't sound like a good idea. But, you want to avoid of having 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 an even balance than to have all of your debt transferred to a single card.
- Apply for gas cards or store credit. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You must always beware of charging a high balance for too long because these types of cards more than likely have a surprising 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, pay them off in one or two payments.
Now that you're more 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 you're ready to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Kelley Rege Properties INC., 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 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.