FICO - The First Step to Home Ownership
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 starts with your finances. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of lender for which you'll qualify in Mineral Wells.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people traditionally have a score of 600, 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 a loan. Some of the pieces 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 your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
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'd be solely because of your credit history. You'll need a score of at least 700 to get a decent interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated in the long run could be more than double the amount of an individual with a superior credit score.
We're used to working with all levels of FICO scores. Call us at (940) 325-2006 and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get it? Building your FICO score takes time. It can be rare 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 using your credit wisely. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Store cards and gas station cards. For those who have no credit or below average credit, chain 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 FICO score. You must always beware of carrying a large balance for more than a couple of billing cycles because these types of cards usually have a steeper interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.
- Stay on top of payments. How often you're late with payments greatly affects your credit score. It's where 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 lender.
- Correct your credit report. If you find mistakes 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 sound like a good idea. But, you don't want to have one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have the most of your debt transferred to one card.
Knowing the methods you can use to raise your credit score, you're one step closer to becoming a homeowner. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Ender & Associates Realty, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Learn more about FICO scores at myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.