Improving Your FICO Score for Home buyers
You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of lender for which you'll qualify in Delray Beach.
A FICO score is a collection 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 traditionally having a score of 650. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is a low score and that often means you can't get a decent interest rate. Some of the pieces in determining your FICO score include:
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many months do you make late payments?
Lenders want to ensure that giving you a loan is a safe move. 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 740 or higher to get a decent interest rate. You can qualify for a mortgage loan with a lower score, but the interest accrued over time could be more than double that of an individual with a superior credit score.
Improving your credit is the best way to ease into buying a home. Call us at (561) 809-8328 and we can help you get on the right track to the home of your dreams.
There are strategies to improve your score. Building your FICO score takes time. It can be hard to make a large-scale change in your FICO 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. You'll improve your credit score by using these helpful hints:
- 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 seem like a good idea. But, you steer clear 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 most of your debt sitting on one card.
- Chain store cards and gas cards. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to obtain credit, increase your credit limits and keep up your payments, which will raise your credit. You must always avoid keeping a large balance for too long because these types of cards more than likely have a higher interest rate.
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, pay them off in one or two payments.
- Stay on top of payments. Delinquent payments drastically lower your credit score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to build up your credit this way, but it's the surest way to show that you're responsible enough to make payments to a bank.
Knowing the methods you can use to improve your credit score, you can move toward becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, 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 application process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting 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.