Scoring Your Credit - How's Your FICO?
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. To make your goal of homeownership realized, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in San Diego, California.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people usually have a score of 650, 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 credit extended to you in the form of a mortgage loan. Some of the pieces in determining your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many times do you make late payments?
- 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 make sure that giving you a loan isn't a risk for them. Your FICO score gives lenders an insight into 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. You'll still qualify for a mortgage with a lower score, but the interest paid over time could be more than double that of someone having a superior credit score.
I'm used to working with all levels of FICO scores. Call me at (619) 917-7510 and I can help you get on the right track to the home of your dreams.
There are strategies to raise your score. Improving your FICO score takes time. It can be hard to make a significant stride 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 most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts stay active. But, be sure to pay them off in one or two payments.
- 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 dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the most reliable way to prove that you're responsible enough to make payments to a bank.
- Ensure that your credit history is correct. If you discover incorrect items 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.
- Spread your debt around. At first, this doesn't seem 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 smaller balance than to have the majority of your debt taking up the balance one card.
- Chain Store cards and service station cards. For those who have non-existent credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your FICO score. You should always avoid keeping a large balance for more than a couple of billing cycles because these types of cards usually have a higher interest rate.
Now that you're better 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 it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid adverse effects on your credit score. With the help of Jessup and Associates Realty, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
Learn more about FICO scores at www.myFICO.com, Fair Isaac's informational site and review your credit history for free at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
I work with all levels of credit and can help you step into home ownership with the best lender for you. E-mail me at firstname.lastname@example.org or call (619) 917-7510 for additional information.