Ways to Increase Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. Without an above average credit score, purchasing a house is harder and, you could find yourself renting longer than you expected in Venice, Florida until your FICO score is acceptable.
The Fair Isaac Company bases 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 just that and often means you can't get a loan. Some of the pieces in reviewing your FICO score include:
- Payment History — How many late payments have you made?
- 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?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
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 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 satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued in the long run could be more than double the amount of someone with a near perfect credit score.
Improving your FICO 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.
There are strategies to boost your score. Improving your FICO score takes time. It can be hard to make a significant stride change in your credit score with small changes, but your score can improve in a few years 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:
- Correct your credit report. If you discover incorrect items 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.
- Even out your debt. At first, this doesn't sound like a good idea. But, you want to avoid 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 a smaller balance than to have the most of your debt taking up the balance a single card.
- Apply for gas cards or chain store credit. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to improve credit, increase your spending limits and have a solid payment history, which will raise your credit. You should always avoid holding a large balance for too long because these types of cards normally have a steeper interest rate.
- Keep your cards in rotation. 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, be sure to pay them off in one or two payments.
- Stay on top of payments. Payment history is a huge factor in your credit score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
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. 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 damaging your credit score. With the help of Venice Hometown Realty, LLC, 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.