FICO - The First Step to Owning
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. To become a homeowner, you must consider your FICO score along with the type of lender for which you'll qualify in Lake Wales, Florida.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people traditionally having a score of 600. 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. Some of the pieces in calculating your FICO score include:
- Payment History — How many late payments have you made?
- 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?
Lenders want to be positive that giving you a loan isn't a risk for them. Your FICO score gives lenders an insight into what type of borrower you'd be solely because of your credit history. You'll need a score of at least 700 to get a acceptable interest rate. You'll still qualify for a loan with a lower score, but the interest accumulated over time could be more than double that of someone having a near perfect FICO score.
Staying on top of your FICO score 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.
You want a stronger 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 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. You'll improve your credit score by using these pointers:
- Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have all of your debt taking up the balance a single card.
- Apply for service station cards or chain store credit. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to start your credit history, increase your spending limits and stay on top of your payments, which will raise your FICO score. You must always beware of keeping a large balance for too long because these types of cards more than likely have a larger interest rate.
- Don't let your cards get dusty. 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 no more than two or three payments.
- Pay on time. Late payments hurt your credit history. It's one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the most reliable way to show that you're able to make payments to a lender.
- Correct your credit report. If you discover mistakes 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.
Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Remember that when it's time to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Legacy Real Estate Center, Inc., shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.
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 credit scores and can help you get back into home ownership with the best lender for you. E-mail us at Dolores@legacyrealestatecenter.com
or call (863) 676-0200 for additional information.