Improving Your FICO Score for Home buyers
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Oil City.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people traditionally having a score of 650. With the change in the economy, however, some borrowers have seen their score lowered as a result of job loss, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in determining your FICO score include:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How often 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 risk. 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 700 or higher to get a decent interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double that of someone with a stronger FICO score.
We're used to working with all tiers of credit history. Call us at (814) 677-2326 and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get it? Building your FICO score takes time. It can be difficult to make a significant change in your FICO score with quick fixes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- 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, pay them off in no more than two or three payments.
- Stay on top of payments. How often you're late with payments greatly affects 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 rebuild your credit this way, 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 discover incorrect items on your credit report, contact 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 sound like a good idea. But, you want to avoid of having one card that is maxed out 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 all of your debt sitting on one card.
- Store cards and gas cards. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and stay on top of your payments, which will raise your FICO score. You should always beware of keeping a large balance for too long because these types of cards traditionally have a surprising interest rate.
Knowing the ways you can raise your credit 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 lender applications within a two-week window to avoid damaging your credit score. With the help of Oil Region Realty, LLC, the loan application 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 you can review all of your credit reports for free each year 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.