FICO - The First Step to Owning
You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet begins the home buying process. To realize your goal of owning a home, you must consider your FICO score along with the type of loan for which you'll qualify in Saint Cloud, Florida.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 650, but scores are tiered from 300 to 850. With the change in the economy, however, some people have seen their score drop by hundreds of points as a result of unemployment, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many times do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
Lenders want to be positive that giving you a loan is a safe move. Your credit score gives lenders a view of 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 a satisfactory interest rate. You'll still get approved for a loan with a lower score, but the interest paid over time could be more than double that of someone with a better 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.
There are methods to improve your score. Building your FICO score takes time. It can be hard to make a large-scale change in your FICO score with quick fixes, but your score can improve in a year or two by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:
- Correct your credit report. If you discover 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 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 your remaining cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have the majority of your debt transferred to one card.
- Store cards and service station cards. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and stay on top of your payments, which will raise your FICO score. You should always beware of carrying a large balance for too long because these types of cards usually have a higher interest rate.
- 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, make sure you pay them off in no more than two or three payments.
- Pay on time. Delinquent payments instantly lower your credit score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to prove that you're responsible enough to make payments to a lender.
Knowing the methods you can use to improve your credit score, you're one step closer to becoming a homeowner. 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 damaging your credit score. With the help of Preferred Real Estate, the loan application 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 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.