Tips on Raising Your FICO Score for Home Buying
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet starts the home buying process. To realize your goal of owning a home, you must consider your FICO score along with the type of lender for which you'll qualify in Oil City, Pennsylvania.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people usually have a score of 650, but scores range from 300 to 850. In recent years, however, some borrowers have seen their score drop dramatically after unemployment, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. 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 — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
In reviewing your credit history, you'll see 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. This means you have three scores, one for each scoring model.
Lenders want to make sure that allowing you a loan isn't a risk for them. Your FICO score gives lenders an insight into what type of borrower you'll be solely because of 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 an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of someone having a better credit score.
We're used to working with all tiers of FICO scores. Contact us 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 there? Improving your FICO score takes time. It can be difficult to make a large-scale change in your credit score with quick fixes, but your score can improve in a year 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:
- Apply for gas station cards or chain store credit. For those who have no credit or below average credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always beware of carrying a large balance for more than a couple of months because these types of cards normally have a larger interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, 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 lower your credit score. It's one of the reasons people who have recently experienced job loss see the biggest dip 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 lender.
- Correct your credit report. If you discover 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 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 steer clear 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 all of your debt transferred to one card.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Keep in mind 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 adverse effects on 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 become a homeowner.
To learn more, visit 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.