Home buyer's Guide to Better Credit
You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. To realize your goal of owning a home, 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 bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. 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 loan. Some of the factors in summing up your FICO score include:
- Payment History — Do you pay your bills on time every month?
- 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?
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 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 740 or higher to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated over time could be more than double that of an individual with a stronger credit score.
Getting your credit in order is the first step in owning a home. 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 hard to make a large-scale change in your credit score with quick fixes, but your score can improve in a year or two by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.
- Keep up with payments. How often you're late with payments greatly affects your credit score. It's where 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 most reliable way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. If you find mistakes 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 seem like a good idea. But, you steer clear 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 smaller balance than to have the majority of your debt sitting on one card.
- Chain store cards and gas station cards. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and have a solid payment history, which will raise your credit. You should always avoid carrying a large balance for more than a couple of months because these types of cards normally have a steeper interest rate.
Knowing the methods you can use to raise your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Oil Region Realty, LLC, the loan process can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at 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.