Scoring Your Credit - How's Your Credit Score

You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. Without an above average credit score, entering into a loan for a house is more difficult and, you could end up renting for another couple of years in DuBois until your FICO score is acceptable.

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. Job loss has been common in the last few years, but 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 in the form of a mortgage loan. Some of the pieces in determining your FICO score are:

• Credit Inquiries — How many times has your credit history been accessed by someone other than you?
• 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?

In reviewing your credit history, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. As a result, you have three scores, one for each scoring model.

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 a view of what type of borrower you'd be solely because of your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double the amount of an individual with a higher credit score.

We're used to working with all levels of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.

You want an improved score, but how do you get there? Improving your FICO score takes time. It can be rare to make a significant stride change in your FICO score with quick fixes, but your score can improve in a year by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:

• Pay on time. Late payments kill your credit history. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to show that you're able to make payments to a bank.
• Ensure that your credit history is correct. 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 pay extra attention to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having 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 a lower balance than to have the bulk of your debt taking up the balance one card.
• Retail 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 credit limits and have a solid payment history, which will raise your FICO score. You must always avoid maintaining a high balance for more than a couple of months because these types of cards more than likely have a higher interest rate.
• Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts stay active. But, make sure you pay them off in no more than two or three payments.

Knowing the ways you can build up 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 credit inquiries within a two-week window to avoid a negative mark on your credit score. With the help of Hoffer Realty Associates, the loan process can be a stress-free experience so you, too, can achieve home ownership.

Learn more about FICO scores at 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.