Scoring Your Credit - How's Your FICO?
The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. To become a homeowner, considering your credit score is a must along with the type of lender for which you'll qualify in Jacksonville, Florida.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 600, 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 a low score and that often means you can't get credit. Some of the pieces in reviewing your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time every month?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
When you pull your credit report, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each scoring model.
Lenders want to make sure that allowing you a loan is a safe move. Your credit score gives lenders an insight into 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 an acceptable interest rate. You'll still qualify for a mortgage loan with a lower score, but the interest accrued in the long run could be more than double that of an individual having a near perfect credit score.
Getting your credit in order 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 get a better score? Building your FICO score takes time. It can be difficult to make a significant stride change in your number 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. You'll improve your credit score by using these pointers:
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, be sure to pay them off in one or two payments.
- Pay on time. Your credit score plummets with each account that goes to collections. It's where people who have recently experienced job loss 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 prove that you're able to make payments to a bank.
- Correct your credit report. If you find mistakes 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. 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 about 30% of their credit limit than to have the majority of your debt taking up the balance a single card.
- Chain Store cards and gas cards. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and have a solid payment history, which will raise your credit. You must always avoid carrying a high balance for more than a couple of billing cycles because these types of cards traditionally have a steeper interest rate.
Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Remember that when it's time to apply for a loan to purchase a house, 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 the Berrang Team, INI Realty Investments, Inc., the loan application process is sure to go more smoothly so you, too, can become a homeowner.
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.
We work with all tiers of credit history and can help you settle into home ownership with the right lending institution for you. E-mail us at email@example.com or call 904.343.1818 for additional information.