First-Time Buyer's Guide to Better Credit

Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet begins the home buying process. Without an above average FICO score, entering into a loan for a house is harder and, you could end up renting longer than you expected in Vista, California 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 traditionally have a score of 600, but scores range from 300 to 850. In recent years, however, some people have seen their score lowered because of loss of employment, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in reviewing your FICO score include:

• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — Do you pay your bills on time ?
• 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?

When you pull your credit report, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to determine 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 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 risk. Your FICO score gives lenders an insight into 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. You can qualify for a mortgage loan with a lower score, but the interest paid over the life of the loan could be more than double that of an individual with a superior FICO score.

We're used to working with all levels of credit scores. Contact us and we can help you get on the right track to the home of your dreams.

How do you boost your credit score? Improving your FICO score takes time. It can be hard to make a significant change in your credit score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:

• Keep up with payments. Delinquent payments instantly lower your credit score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit this way, but it's the most reliable way to show that you're responsible enough to make payments to a bank.
• Ensure that your credit history is correct. If you discover incorrect items 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 give extra care to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't sound like a good idea. But, you don't want to have 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 less than 40% of their credit limit than to have all 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 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 should always beware of maintaining a high balance for more than a couple of months because these types of cards more than likely have a surprising interest rate.
• Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.

Knowing the ways you can improve your credit score, you can move toward becoming a homeowner. Keep in mind that when you're ready to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Stoneridge Realty & Property Management Services, the loan process is sure to go more smoothly 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.