Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. Without an acceptable FICO score, entering into a loan for a house is more difficult and, you could end up renting longer than you expected in Flagler Beach, Palm Coast, Beachside until your score improves.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people normally having a score of 650. Job loss has been common in the last few years, but 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 calculating your FICO score are:
- 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?
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 view of what type of borrower you are based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a satisfactory interest rate. You'll still qualify for a loan with a lower score, but the interest accrued over the life of the loan could be more than double that of an individual with a stronger credit score.
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Staying on top of your FICO score is the first step in buying a home. Contact us and we can help you get on the right track to the home of your dreams.
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How do you boost your credit score? Building your FICO score takes time. At Ben & Marie Lane, Watson Realty Corp., we know it's difficult to make a significant stride change in your FICO score with quick fixes, 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. Here are some methods to improve your credit score:
- Even out your debt. At first, this doesn't seem like a good idea. But, you don't want to have one card that is at 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 bulk of your debt sitting on one card.
- Store cards and gas cards. For those who have no 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 FICO score. Just beware of maintaining a balance for more than a couple of billing cycles because these types of cards normally have a steeper interest rate.
- Don't let your cards get dusty. 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, make sure you pay them off in no more than two or three payments.
- Stay on top of payments. Late payments hurt your credit score. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
- Correct your credit report. If you find incorrect items on your credit report, write to 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.
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Knowing the ways you can raise 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 house, you'll want to keep your lender applications within a two-week window to avoid adverse effects your credit score. With the help of Ben & Marie Lane, Watson Realty Corp., the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.
At Ben & Marie Lane, Watson Realty Corp. we don't judge you based on your credit and can help you get back into home ownership with the best mortgage lender for you. E-mail us at twolanes@twolanes.com or call 386-931-8531 for additional information.
