Scoring Your Credit - How's Your Credit Score
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Without an acceptable FICO score, buying a house is more difficult and, you could find yourself renting longer than you expected in Moore, Oklahoma until you raise your score.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people usually have a score of 600, but scores are tiered from 300 to 850. In recent years, however, some people have seen their score lowered as a result of unemployment, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in reviewing your FICO score are:
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time each month?
When you pull your credit report, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate 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 of the bureaus.
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 FICO score gives lenders a view of what type of borrower you'll 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 a satisfactory interest rate. You can qualify for a loan with a lower score, but the interest paid in the long run could be more than double that of someone with a higher FICO score.
Improving your FICO score is the first step in buying 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 difficult to make a large-scale change in your number with quick fixes, but your score can improve in a few years by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Keep up with payments. Your FICO score plummets with each account that goes to collections. 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 rebuild your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. If you find 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 give extra care to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't sound 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 bulk of your debt taking up the balance a single card.
- Apply for service station cards or store credit. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to repair credit, increase your credit limits and keep up your payments, which will raise your FICO score. You should always avoid keeping a large balance for too long because these types of cards traditionally have a surprising interest rate.
- Use your credit. 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, make sure you pay them off in no more than two or three payments.
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 house, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Realty Experts Inc, 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 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.