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 content of your wallet starts the home buying process. To realize your goal of owning a home, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Delray Beach, Florida.
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 the majority of people normally having a score of 600. In recent years, however, some borrowers have seen their score lowered as a result of job loss, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in reviewing your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time every month?
- 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?
In reviewing your credit history, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems 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 three of the bureaus.
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 an insight into 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 satisfactory interest rate. You'll still qualify for a loan with a lower score, but the interest accumulated in the long run could be more than double that of an individual having a higher FICO score.
We're used to working with all tiers of credit scores. Call us at (561) 809-8328 and we can help you get on the right track to the home of your dreams.
There are methods to increase your score. Building your FICO score takes time. It can be difficult to make a large-scale change in your credit score with small changes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some methods to 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, 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 where 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 find mistakes 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 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 at the limit and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have the bulk of your debt transferred to a single card.
- Chain store cards and gas cards. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to improve credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You should always beware of keeping a high balance for too long because these types of cards traditionally have a surprising interest rate.
Knowing the methods you can use to build up your credit score, you can move toward becoming a homeowner. Know that when you're ready to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Illustrated Properties, the loan 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.