Home buyer's Guide to Better Credit

Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of loan for which you'll qualify in DuBois.

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 are tiered from 300 to 850. 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 factors in deciding your FICO score are:

• 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 each month?
• Credit to Debt Ratio — How much do you owe versus your available credit?

Lenders want to make sure that giving you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you are based solely on your credit history. You'll need a score of at least 700 to get a decent interest rate. You can get approved for a mortgage loan with a lower score, but the interest paid over the life of the loan could be more than double the amount of someone with a better FICO score.

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.

You want a higher score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a significant stride change in your credit score with quick fixes, 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. Here are some ways you can improve your credit score:

• Stay on top of payments. Payment history is a big factor in 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 restore your credit this way, but it's the most reliable 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, contact 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 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 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 about 25% of their credit limit than to have all of your debt taking up the balance a single card.
• Chain store cards and gas station cards. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and keep up your payments, which will raise your credit. You should always avoid keeping a high balance for too long because these types of cards usually have a surprisingly high interest rate.
• Use your credit. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.

Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, 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 credit inquiries within a two-week window to avoid adverse effects 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 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.