How's Your Score?
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. To make your goal of homeownership realized, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Delray Beach.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores range from 300 to 850. 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 factors in deciding your FICO score are:
- 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 — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
In reviewing your credit history, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with each of the bureaus.
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your FICO score gives lenders a view of what type of borrower you'll be solely because of your credit history. You'll need a score of at least 700 to get a decent interest rate. You'll still get approved for a mortgage loan with a lower score, but the interest accrued over the life of the loan could be more than double that of an individual having a superior credit score.
Getting your credit in order is the best way to ease into owning a home. Call us at 855-693-3572 X 1 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 change in your number with small changes, but your score can improve in a year 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 tips:
- Apply for gas station cards or store credit. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You should always beware of charging a high balance for more than a couple of billing cycles because these types of cards usually have a steeper 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, pay them off in no more than two or three payments.
- Keep up with payments. Payment history is a big factor in 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 with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
- 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 sound like a good idea. But, you want to avoid of having one card that is at the limit 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 majority of your debt transferred to a single card.
Now that you know more 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 it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Silver International Realty, 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 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.