Scoring Your FICO
Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process starts with your finances. To realize your goal of owning a home, considering your credit score is a must along with the type of lender for which you'll qualify in Saratoga Springs, New York.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores range 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 a low score and that often means you can't get a loan. Some of the factors in determining your FICO score are:
- 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?
- Payment History — Do you pay your bills on time each month?
When you pull your credit report, you'll discover 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.
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 FICO score gives lenders an insight into what type of borrower you are 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. If your score is lower, you can still qualify for a loan, but the interest accrued over time could be more than double the amount of someone having a near perfect credit score.
We're used to working with all levels of FICO scores. Call us at (518) 691-0669 and we can help you get on the right track to the home of your dreams.
You want a higher score, but how do you get there? Improving your FICO score takes time. It can be rare to make a significant change in your number 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. You'll improve your credit score by using these helpful hints:
- Correct your credit report. If you discover mistakes on your credit report, write to 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 seem like a good idea. But, you don't want to have one card that is at the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at an even balance than to have the majority of your debt sitting on a single card.
- Chain store 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 repair credit, increase your spending limits and have a solid payment history, which will raise your FICO score. You must always avoid holding a high balance for more than a couple of billing cycles because these types of cards more than likely have a larger interest rate.
- Keep your cards in rotation. 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, make sure you pay them off in one or two payments.
- Keep up with payments. Delinquent payments drastically lower your credit 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 this way, but it's the most reliable way to prove that you're responsible enough to make payments to a lender.
Knowing the ways you can raise your FICO score, you can move toward becoming a homeowner. Remember that when it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of High Rock Realty, Inc., shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at 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.