Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of lender for which you'll qualify in Polk County.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people normally having a score of 650. Since we've experienced an economic downturn, however, some borrowers have seen their score drop by hundreds of points as a result of loss of employment, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in deciding your FICO score are:
- Payment History — How often 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?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
When you pull your credit report, you'll discover 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. You have a credit score with all of the bureaus.
Lenders want to make sure that allowing you a loan is a safe move. Your credit score gives lenders view of what type of borrower you'd be based solely on 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 decent interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over time could be more than double the amount of an individual having a higher credit score.
 |
 |
 |
Improving your credit 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. At A HomeTown Realty, Inc., we know it's hard to make a significant change in your number with small changes, but your score can improve in a few years 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. You'll improve your credit score by using these helpful hints:
- Chain Store cards and gas station cards. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and have a solid payment history, which will raise your credit. Just avoid carrying a high balance for more than a couple of two because these types of cards traditionally have a surprisingly high interest rate.
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts stay active. But, be sure to pay them off in no more than two or three payments.
- Pay on time. Delinquent payments drastically lower your credit score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to show that you're able to make payments to a lender.
- Ensure that your credit history is correct. If you discover 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 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 don't want to have one card that is holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at a lower balance than to have all of your debt taking up the balance one card.
|
Now that you're more informed 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 credit inquiries within a two-week window to avoid adverse effects your credit score. With the help of A HomeTown Realty, Inc., the loan process can be a stress-free experience so you, too, can achieve home ownership.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
At A HomeTown Realty, Inc. we don't judge you based on your FICO scores and can help you get back into home ownership with the best mortgage lender for you. E-mail us at hopecall@att.net or call (863) 421-0101 for additional information.
