Increasing Your FICO Score for Home Ownership
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you lack an acceptable credit score to back it up, you could end up renting longer than you expected in Saratoga Springs, New York until your FICO score is acceptable.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of 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 loan. Some of the pieces in reviewing your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How often do you make late payments?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
Lenders want to ensure that allowing you a loan is a safe move. Your credit score gives lenders a view of what type of borrower you'd be based solely on your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over time could be more than double that of someone with a superior FICO score.
We're used to working with all levels of credit scores. Call us at (518) 691-0669 and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Building your FICO score takes time. It can be rare to make a large-scale change in your FICO score with quick fixes, but your score can improve in a year by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Pay on time. Payment history is a big factor in your FICO score. It's where 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 most reliable way to prove that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you find 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 pay extra attention to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having one card that is holding the maximum 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 bulk of your debt taking up the balance a single card.
- Department store cards and service station cards. For those who have non-existent credit or low credit, retail credit cards and gas credit cards are ways to improve credit, increase your spending limits and keep up your payments, which will raise your FICO score. You should always beware of carrying a large balance for more than a couple of billing cycles because these types of cards normally have a steeper interest rate.
- Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts maintain an active status. But, pay them off in one or two payments.
Knowing the ways you can raise your FICO score, you're one step closer to 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 a negative mark on your credit score. With the help of High Rock Realty, Inc., the loan process can be a stress-free experience 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.