Scoring Your Credit - How's Your Credit Score
Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. Putting back your money for a down payment is great, but if you lack a strong credit score to reinforce it, you could find yourself renting longer than you expected in Carthage until your FICO score is acceptable.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people usually have a score of 600, but scores are tiered from 300 to 850. In recent years, however, some people have seen their score drop dramatically after unemployment, closed credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in determining your FICO score include:
- 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?
- Payment History — Do you pay your bills on time every month?
Lenders want to ensure that allowing you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you'd be based solely on your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. You'll still get approved for a loan with a lower score, but the interest accumulated in the long run could be more than double that of someone with a stronger credit score.
Staying on top of your FICO score is the best way to ease into purchasing a home. Contact us and we can help you get on the right track to the home of your dreams.
There are methods to raise your 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 few years by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these tips:
- Chain store cards and gas cards. For those who have no credit or below average credit, department store credit cards and gas credit cards are ways to get credit, increase your credit limits and stay on top of your payments, which will raise your credit. You should always avoid keeping a large balance for too long because these types of cards traditionally have a higher interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts stay active. But, be sure to pay them off in one or two payments.
- Stay on top of payments. Late payments hurt your FICO 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 rebuild your credit with payment history, but it's the surest way to prove that you're responsible enough to make payments to a bank.
- Correct your credit report. If you find incorrect items on your credit report, write to the bureau asking 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 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 about 30% of their credit limit than to have the most of your debt transferred to one card.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. 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 a negative mark on your credit score. With the help of Charles Burt Homefolks, shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting 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.