Scoring Your Credit - How's Your Credit Score
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins with your finances. To make your goal of homeownership realized, you must consider your FICO score along with the type of lender for which you'll qualify in Huntington Beach, California.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores range from 300 to 850. In recent years, however, some people have seen their score drop by hundreds of points because of unemployment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding your FICO score are:
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- 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 many months do you make late payments?
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 credit score gives lenders an insight into what type of borrower you are solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over time could be more than double the amount of someone having a near perfect credit score.
Getting your credit in order is the best way to ease into owning a home. Call us at (714) 595-5103 and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be rare to make a large-scale change in your FICO 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:
- Ensure that your credit history is correct. 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 give extra care 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 a lower balance than to have the most of your debt transferred to a single card.
- Apply for gas station cards or chain store credit. For those who have no credit or low credit, department store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and stay on top of your payments, which will raise your FICO score. You must always beware of charging a large balance for more than a couple of months because these types of cards more than likely have a steeper interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, make sure you pay them off in one or two payments.
- Pay on time. Late payments hurt your credit score. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the surest way to show that you're able to make payments to a lender.
Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. 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 adverse effects on your credit score. With the help of Jody and Lorie - Remax TerraSol, shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting 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.