Home buyer's Guide to Better Credit
You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. To become a homeowner, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in DuBois, Pennsylvania.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people normally having a score of 600. In recent years, however, some borrowers have seen their score lowered as a result of underemployment, closed credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in summing up your FICO score include:
- 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?
When you pull your credit report, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with all three of the bureaus.
Lenders want to be positive that giving you a loan is a safe move. Your credit 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 740 to get a decent interest rate. You'll still get approved for a loan with a lower score, but the interest accrued over time could be more than double that of an individual having a superior FICO score.
Getting your credit in order is the first step in owning a home. Contact us and we can help you get on the right track to the home of your dreams.
How do you obtain a stronger score? Improving your FICO score takes time. It can be hard to make a significant stride change in your credit score with quick fixes, but your score can improve in a year by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts stay active. But, make sure you pay them off in no more than two or three payments.
- Keep up with payments. Delinquent payments drastically lower 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 restore your credit with payment history, but it's the surest way to show that you're responsible enough to make payments to a bank.
- Correct your credit report. If you discover incorrect items on your credit report, contact 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.
- Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at an even balance than to have the bulk of your debt sitting on a single card.
- Chain store cards and service station cards. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to start your credit history, increase your spending limits and stay on top of your payments, which will raise your credit. You must always beware of holding a high balance for more than a couple of billing cycles because these types of cards traditionally have a surprising interest rate.
Now that you're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Know that when you're ready to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Hoffer Realty Associates, the loan application process can be a stress-free experience so you, too, can become a homeowner.
Get more information by visiting 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.