FICO - The First Step to Home Buying
The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of lender for which you'll qualify in Vista, California.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. In recent years, however, some people have seen their score drop dramatically because of loss of employment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in determining your FICO score are:
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time every month?
- Credit to Debt Ratio — How much do you owe versus your available credit?
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 a view of what type of borrower you'd be 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 an acceptable interest rate. You can qualify for a mortgage with a lower score, but the interest accumulated over time could be more than double the amount of an individual having a superior FICO score.
Improving your credit is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.
There are plans to improve your score. Improving your FICO score takes time. It can be hard to make a significant change in your number with quick fixes, but your score can improve in a year by keeping tabs your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.
- Stay on top of payments. Your credit score plummets with every account that goes to collections. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to build up 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 find 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 seem like a good idea. But, you steer clear 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 about 20% of their credit limit than to have the majority of your debt transferred to a single card.
- Apply for gas cards or department store credit. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to obtain credit, increase your credit limits and have a solid payment history, which will raise your credit. You must always beware of holding a high balance for too long because these types of cards normally have a higher interest rate.
Knowing the methods you can use to improve your credit score, you're one step closer to becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of Stoneridge Realty & Property Management Services, the loan process can be a stress-free experience so you, too, can become a homeowner.
To learn more, visit 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.