How's Your Credit?
The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. Putting back your money for a down payment is a good idea, but if you don't have a strong credit score to reinforce it, you could end up renting for another couple of years in Davie, Florida until you raise your score.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 600, but scores are tiered from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a decent interest rate. Some of the factors in determining your FICO score include:
- 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?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How often do you make late payments?
Lenders want to be positive that allowing you a loan isn't a risk for them. 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 700 to get a acceptable interest rate. You'll still qualify for a mortgage with a lower score, but the interest paid in the long run could be more than double the amount of an individual having a stronger credit score.
Improving your FICO score is the first step in owning a home. Contact us and we can help you get on the right track to the home of your dreams.
You want an improved score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a significant change in your credit score with quick fixes, but your score can improve in a few years by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Retail cards and service station cards. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and stay on top of your payments, which will raise your FICO score. You should always avoid charging a high balance for more than a couple of months because these types of cards usually have a surprising interest rate.
- Use your credit. 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 stay active. But, make sure you pay them off in no more than two or three payments.
- Pay on time. Delinquent payments instantly drop 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 with payment history, but it's the most reliable way to prove that you're responsible enough to make payments to a bank.
- Correct your credit report. If you find mistakes 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. 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 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 sitting on a single card.
Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Know that when you're ready to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid a negative mark on 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 become a homeowner.
Learn more about FICO scores at myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.