How's Your Score?
The road to home ownership doesn't start 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. To become a homeowner, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Loveland, Colorado.
The Fair Isaac Company bases 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. 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 a decent interest rate. Some of the factors in calculating your FICO score are:
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time ?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
Lenders want to be positive that allowing you a loan is a safe move. Your FICO 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 acceptable interest rate. You can get approved for a loan with a lower score, but the interest paid over time could be more than double the amount of an individual with a stronger 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.
How do you boost your credit score? Building your FICO score takes time. It can be difficult to make a significant change in your credit score with quick fixes, but your score can improve in a year by monitoring 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:
- Retail cards and gas cards. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and have a solid payment history, which will raise your FICO score. You must always avoid carrying a large balance for too long because these types of cards traditionally have a surprisingly high interest rate.
- Use your credit. 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, pay them off in no more than two or three payments.
- Keep up with payments. Delinquent payments drastically drop 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 build up 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 give extra care to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't sound like a good idea. But, you don't want to have 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 an even balance than to have the majority of your debt taking up the balance one card.
Knowing the ways you can build up your FICO score, you're one step closer to becoming a homeowner. Know that when you're ready to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid adverse effects on your credit score. With the help of At Home Real Estate Company, the loan process is sure to go more smoothly so you, too, can achieve home ownership.
Learn more about FICO scores at 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.