How's Your Credit?
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. Without a reasonable FICO score, buying a house is harder and, you could end up renting longer than you expected in Landrum, South Carolina 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. The score ranges from 300 to 850, with most people normally having a score of 600. Even though more people these days are experiencing job loss and delinquent credit cards, FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a loan. Some of the factors in deciding your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — Do you have too many open accounts?
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your credit score gives lenders a view of what type of borrower you'll 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 satisfactory interest rate. You'll still get approved for a mortgage with a lower score, but the interest paid over time could be more than double the amount of someone with a superior credit score.
We're used to working with all levels of FICO scores. Call us at 828-817-1796 and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be rare to make a large-scale change in your credit score with quick fixes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts stay active. But, pay them off in one or two payments.
- Pay on time. Payment history is a big factor in your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the most reliable way to show that you're responsible enough 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 steer clear of having one card that is at the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the most of your debt taking up the balance one card.
- Department store cards and service station cards. For those who have no credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to get credit, increase your spending limits and stay on top of your payments, which will raise your FICO score. You should always beware of holding a high balance for too long because these types of cards normally have a surprisingly high interest rate.
Knowing the ways you can build up your credit score, you're one step closer to becoming a homeowner. Know 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 Mickey Hambright, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
Get more information by visiting myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.