Tips on Improving Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. To make your goal of homeownership realized, you must consider your FICO score along with the type of loan for which you'll qualify in Davie, Florida.
A FICO score is a review 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 650. 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 a low score and that often means you can't get a loan. Some of the factors in determining your FICO score include:
- Payment History — How often do you make late payments?
- 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 loans and credit cards?
Lenders want to be positive that giving you a loan is a safe move. Your credit 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 decent interest rate. You'll still get approved for a mortgage with a lower score, but the interest paid in the long run could be more than double that of an individual having a better FICO score.
Getting your credit in order is the first step in buying a home. Contact us and we can help you get on the right track to the home of your dreams.
There are strategies to increase your score. Building your FICO score takes time. It can be difficult to make a significant stride change in your credit score with small changes, but your score can improve in a few years by keeping tabs 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:
- Stay on top of payments. Payment history is a big factor in your FICO score. It's one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you discover mistakes 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 give extra care to make sure the activity reported is correct.
- Spread your debt around. 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 the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have the majority of your debt sitting on a single card.
- Apply for gas station cards or chain store credit. For those who have non-existent credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and have a solid payment history, which will raise your FICO score. You must always avoid carrying a high balance for too long because these types of cards more than likely have a surprisingly high interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards to make sure your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Remember that when you're ready to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Unicasa International USA Realty, shopping for a mortgage 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 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.
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