Scoring Your Credit - How's Your FICO?
The road to home ownership doesn't start 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, considering your credit score is a must along with the type of loan for which you'll qualify in Farwell, Texas.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most 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 a low score and that often means you can't get credit extended to you in the form of a mortgage loan. Some of the factors in summing up your FICO score are:
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How often do you make late payments?
When you pull your credit report, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to calculate 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 giving you a loan is a safe move. 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 decent interest rate. You'll still get approved for a mortgage with a lower score, but the interest accrued over time could be more than double the amount of an individual with a near perfect 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 plans to raise your score. Improving your FICO score takes time. It can be difficult to make a significant change in your FICO score with small changes, but your score can improve in a few years by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Correct your credit report. If you find 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 give extra care 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 about 20% of their credit limit than to have the most of your debt transferred to a single card.
- Apply for gas cards or chain store credit. For those who have non-existent credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to start your credit history, increase your spending limits and keep up your payments, which will raise your credit. You must always beware of keeping a large balance for too long because these types of cards normally have a larger interest rate.
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, make sure you pay them off in one or two payments.
- Keep up with payments. Late payments kill your credit history. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable way to prove that you're responsible enough to make payments to a lender.
Knowing the ways you can improve your FICO score, you're one step closer to becoming a homeowner. Remember that when it's time to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of J.B. Sudderth Realty, Inc., the loan process is sure to go more smoothly so you, too, can achieve home ownership.
To learn more, visit 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.