FICO - The First Step to Home Ownership
Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet begins the home buying process. Saving your money for a down payment is great, but if you lack a strong credit score to back it up, you could find yourself renting for another couple of years in Centennial until your score improves.
A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. Most people usually have a score of 600, but scores are tiered from 300 to 850. With the change in the economy, however, some borrowers have seen their score drop by hundreds of points as a result of job loss, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in determining your FICO score are:
- Payment History — Do you pay your bills on time ?
- 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 allowing you a loan is a safe move. Your credit score gives lenders a view of what type of borrower you are solely because of your credit history. You'll need a score of at least 700 to get a decent interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double that of an individual with a stronger FICO score.
We're used to working with all tiers of credit scores. Call us at 303-284-3609 and we can help you get on the right track to the home of your dreams.
You want a stronger score, but how do you get there? Improving your FICO score takes time. It can be rare to make a significant stride change in your FICO score with quick fixes, but your score can improve in a few years by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Stay on top of payments. Late payments hurt your credit history. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore 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 discover incorrect items on your credit report, write to 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.
- 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 holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have the bulk of your debt transferred to a single card.
- Apply for gas cards or retail credit. For those who have no credit or below average credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your FICO score. You should always beware of holding a large balance for more than a couple of months because these types of cards traditionally have a higher interest rate.
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
Now that you're better informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Keep in mind 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 Antle Properties / Metro Brokers, shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
We won't judge you based on your FICO scores and can help you get back into home ownership with the right mortgage lender for you. E-mail us at email@example.com or call 303-284-3609 for additional information.