How's Your Score?
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. Without a reasonable credit score, purchasing a house is more difficult and, you could find yourself renting longer than you expected in Tryon until your score improves.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 650, but scores are tiered from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a decent interest rate. Some of the pieces in determining your FICO score include:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time ?
- 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 ensure that allowing you a loan isn't a risk for them. Your FICO 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 an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of an individual having a stronger FICO score.
Improving your FICO is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.
You want an improved score, but how do you get it? Building your FICO score takes time. It can be difficult to make a large-scale change in your credit score with quick fixes, 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. You'll improve your credit score by using these helpful hints:
- Pay on time. Payment history is a huge factor in your FICO score. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. 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 want to avoid of having 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 25% of their credit limit than to have all of your debt sitting on a single card.
- Apply for gas cards or department store credit. For those who have no credit or below average credit, department store credit cards and gas credit cards are ways to obtain credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You should always beware of maintaining a large balance for more than a couple of billing cycles because these types of cards more than likely have a surprisingly high 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, be sure to pay them off in one or two payments.
Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of RE/MAX Advantage Realty, shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
Learn more about FICO scores at 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.