Improving Your FICO Score for Home Ownership
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. To become a homeowner, you must consider your FICO score along with the type of loan for which you'll qualify in DuBois.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people usually have a score of 650, 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 a low score and that often means you can't get credit extended to you via a mortgage loan. Some of the pieces in summing up your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- 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?
Lenders want to be positive that allowing you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you'll be based solely on your credit history. You'll need a score of at least 700 to get a acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of an individual having a higher credit score.
We're used to working with all tiers of credit scores. Call us at (814) 371-2100 and we can help you get on the right track to the home of your dreams.
How do you obtain a higher score? Building your FICO score takes time. It can be difficult to make a significant stride 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 helpful hints:
- 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 at the maximum 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 majority of your debt transferred to one card.
- Retail cards and gas station cards. For those who have non-existent credit or less-than-stellar credit, store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and stay on top of your payments, which will raise your credit. You should always beware of charging a large balance for more than a couple of months because these types of cards more than likely have a larger interest rate.
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, 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.
- Pay on time. Your credit score plummets with each account that goes to collections. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit this way, 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 mistakes 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 pay extra attention to make sure the activity reported is correct.
Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Keep in mind 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 a negative mark on your credit score. With the help of Hoffer Realty Associates, shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
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.