Scoring Your FICO
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins and ends with your finances. To become a homeowner, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Fall River.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. 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 credit extended to you in the form of a mortgage loan. Some of the factors in calculating your FICO score are:
- 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?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
When you pull your credit report, 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 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.
Lenders want to make sure 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. You'll need a score of at least 740 to get a acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over the life of the loan could be more than double that of someone with a higher credit score.
We're used to working with all levels of FICO scores. Call us at (508) 646-4777 and we can help you get on the right track to the home of your dreams.
There are plans to boost your score. Improving your FICO score takes time. It can be rare to make a significant stride change in your number with quick fixes, but your score can improve in a year or two by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Store cards and gas cards. For those who have no credit or below average credit, department store credit cards and gas credit cards are ways to get credit, increase your credit limits and keep up your payments, which will raise your FICO score. You should always beware of maintaining a large balance for too long because these types of cards usually 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, make sure you pay them off in one or two payments.
- Keep up with payments. Your credit score plummets with every account that goes to collections. It's where people who have recently experienced job loss 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 show that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you discover incorrect items on your credit report, contact 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.
- Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid 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 about 25% of their credit limit than to have the majority of your debt transferred to a single card.
Knowing the methods you can use to build up your credit score, you're one step closer to becoming a homeowner. Keep in mind that when you're ready 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 E Z Home Search Real Estate Inc., shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.
Learn more about FICO scores at 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.