Home buyer's Guide to Better Credit
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 starts and ends with your finances. Without a reasonable credit score, buying a house is more difficult and, you could find yourself renting for another couple of years in Davie, Florida until you improve your score.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people traditionally have a score of 600, but scores are tiered 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 a decent interest rate. Some of the pieces in determining your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How often do you make late payments?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
Lenders want to be positive that giving you a loan isn't a risk for them. Your credit score gives lenders an insight into what type of borrower you'd 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 an acceptable interest rate. If your score is less than that, 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 having a superior credit score.
Improving your FICO is the first step in owning a home. Call us at 954-900-2699 or 954-661-2840 and we can help you get on the right track to the home of your dreams.
There are ways to increase your score. Building your FICO score takes time. It can be hard to make a significant stride change in your FICO score with small changes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Keep up with payments. Payment history is a huge factor in your credit score. 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 build up your credit with payment history, but it's the most reliable way to prove that you're able 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the majority of your debt sitting on one card.
- Department Store cards and service station cards. For those who have non-existent credit or low credit, retail credit cards and gas credit cards are ways to repair credit, increase your spending limits and stay on top of your payments, which will raise your credit. You must always beware of carrying a large balance for too long because these types of cards more than likely have a higher interest rate.
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 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 adverse effects on your credit score. With the help of Greater Florida Realty inc., the loan application process is sure to go more smoothly so you, too, can become a homeowner.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
We work with all tiers of credit scores and can help you settle into home ownership with the right mortgage lender for you. E-mail me at firstname.lastname@example.org or call 954-900-2699 or 954-661-2840 for more information.