Scoring 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 starts the home buying process. To become a homeowner, considering your credit score is a must along with the type of loan for which you'll qualify in Coos County.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people traditionally have a score of 650, but scores are tiered from 300 to 850. With the change in the economy, however, some borrowers have seen their score drop dramatically because 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 are:
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- 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?
In reviewing your credit history, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each bureau.
Lenders want to make sure that giving you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you'll be solely because of your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. You can qualify for a loan with a lower score, but the interest accumulated over the life of the loan could be more than double the amount of an individual having a higher credit score.
We're used to working with all tiers of credit 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 change in your number with small changes, but your score can improve in a year or two 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. Here are some methods to improve your credit score:
- Spread your debt around. At first, this doesn't sound 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 lower balance than to have the most of your debt transferred to a single card.
- Store cards and gas station cards. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to improve credit, increase your spending limits and stay on top of your payments, which will raise your FICO score. You must always avoid charging a large balance for more than a couple of months because these types of cards normally have a higher interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Pay on time. Late payments hurt your credit history. 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 with payment history, but it's the most reliable way to prove that you're able to make payments to a bank.
- Correct your credit report. If you discover 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.
Knowing the ways you can improve your credit score, you're one step closer to becoming a homeowner. Remember that when it's time 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 Pacific Properties, shopping for a mortgage 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.
We won't judge you based on your credit history and can help you get back into home ownership with the right lending insitution for you. E-mail us at Randy@pacificpropertiesteam.com or call (541) 269-5263 for additional information.