Scoring Your Credit - How's Your Credit Score
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. Without an acceptable FICO score, buying a house is more difficult and, you could find yourself renting longer than you expected in Oil City, Pennsylvania until you raise your score.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. With the change in the economy, however, some people have seen their score lowered as a result of unemployment, charged off 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:
- Payment History — How many months do you make late payments?
- 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 problem. Your FICO score gives lenders a view of what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over the life of the loan could be more than double that of an individual with a stronger FICO 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.
How do you boost your credit score? Building your FICO score takes time. It can be hard to make a significant stride change in your number with small changes, but your score can improve in a few years 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:
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.
- Keep up with payments. Your credit 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 build up your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a lender.
- Ensure that your credit history is correct. If you find incorrect items on your credit report, write to 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.
- Spread your debt around. At first, this doesn't sound like a good idea. But, you don't want to have 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 bulk of your debt sitting on one card.
- Store cards and gas cards. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your FICO score. You should always beware of carrying a large balance for too long because these types of cards normally have a surprising interest rate.
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 you're ready 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 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.