Ways to Increase Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins with your finances. To become a homeowner, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Flowery Branch.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally 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 just that and often means you can't get credit extended to you in the form of a mortgage loan. Some of the factors in reviewing your FICO score include:
- 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?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
In reviewing your credit history, you'll see 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 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'll 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 a decent interest rate. You'll still get approved for a mortgage with a lower score, but the interest accumulated over time could be more than double the amount of an individual with a stronger credit score.
Getting your credit in order is the best way to ease into owning a home. Contact us and we can help you get on the right track to the home of your dreams.
You want an improved score, but how do you get there? Improving your FICO score takes time. It can be difficult to make a large-scale change in your credit score with small changes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The best way to do this is to know your FICO score. You'll improve your credit score by using these tips:
- Stay on top of payments. Payment history is a huge factor in your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to show that you're responsible enough to make payments to a bank.
- Correct your credit report. If you discover incorrect items 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 seem like a good idea. But, you steer clear of having one card that is at 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 majority of your debt taking up the balance one card.
- Apply for gas station cards or department store credit. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and keep up your payments, which will raise your credit. You should always beware of charging a large balance for too long because these types of cards traditionally have a surprisingly high interest rate.
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Remember that when you're ready 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 JG Atlanta Properties, LLC., the loan application process 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 you can review all of your credit reports for free each year 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.