FICO - The First Step to Owning
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To become a homeowner, you must consider your FICO score along with the type of lender for which you'll qualify in Loveland, Colorado.
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. With the change in the economy, however, some borrowers have seen their score drop dramatically because of loss of employment, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in reviewing your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many months 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?
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your credit score gives lenders a view of what type of borrower you'd be based solely on 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 an acceptable 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 higher FICO score.
Getting your credit in order is the first step in owning a home. Call us at (970) 203-1101 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 there? Improving your FICO score takes time. It can be rare to make a significant stride change in your number with quick fixes, but your score can improve in a year or two 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 methods to improve your credit score:
- Keep your cards in rotation. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Keep up with payments. Payment history is a huge factor in your FICO score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable way to show that you're able to make payments to a bank.
- Correct your credit report. If you find 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.
- 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 one card.
- Apply for gas cards or retail credit. For those who have non-existent credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to obtain credit, increase your credit limits and keep up your payments, which will raise your FICO score. You should always beware of keeping a high balance for too long because these types of cards usually have a surprising interest rate.
Knowing the methods you can use to build up your FICO score, you're one step closer to becoming a homeowner. Keep in mind 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 damaging your credit score. With the help of At Home Real Estate Company, the loan process can be a stress-free experience so you, too, can achieve home ownership.
Get more information by visiting myFICO.com, Fair Isaac's informational site and review your credit history for free 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.