How's Your FICO?
The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. Saving your money for a down payment is great, but if you don't have a strong credit score to back it up, you could end up renting longer than you expected in Burleson until your FICO score is acceptable.
The Fair Isaac Company calculates 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 via a mortgage loan. Some of the factors in determining your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time each 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?
Lenders want to ensure that allowing you a loan isn't a risk for them. Your credit score gives lenders an insight into 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 acceptable 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 an individual having a near perfect 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.
How do you boost your credit score? Improving your FICO score takes time. It can be hard to make a large-scale change in your credit score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. You'll improve your credit score by using these tips:
- Ensure that your credit history is correct. If you discover 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 pay extra attention to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have all of your debt sitting on one card.
- Store cards and service station cards. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and have a solid payment history, which will raise your FICO score. You should always avoid holding a large balance for more than a couple of billing cycles because these types of cards more than likely have a higher interest rate.
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts stay active. But, be sure to pay them off in one or two payments.
- Stay on top of payments. Late payments kill your credit history. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to show 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. Remember that when it's time to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Top Texas Realty, the loan process is sure to go more smoothly so you, too, can achieve home ownership.
To learn more, visit 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.