Raising Your FICO Score for Home buyers
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. To become a homeowner, you must consider your FICO score along with the type of loan for which you'll qualify in Glendale, Arizona.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people usually have a score of 650, but scores range from 300 to 850. Since we've experienced an economic downturn, however, some people have seen their score drop dramatically because of unemployment, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in calculating your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many months do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
Lenders want to be positive that giving you a loan is a safe move. Your credit score gives lenders an insight into what type of borrower you are based solely on your credit history. You'll need a score of at least 740 to get a acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest paid in the long run could be more than double that of an individual with a stronger FICO score.
There are ways to boost your score. Building your FICO score takes time. It can be rare to make a large-scale change in your credit score with quick fixes, but your score can improve in a few years by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:
- Ensure that your credit history is correct. If you discover incorrect items 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you want to avoid 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 an even balance than to have the majority of your debt transferred to one card.
- Apply for gas station cards or department store credit. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and have a solid payment history, which will raise your credit. You should always avoid holding a high balance for more than a couple of billing cycles because these types of cards normally have a surprisingly high interest rate.
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.
- Stay on top of payments. Your FICO score plummets with each account that goes to collections. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to prove that you're responsible enough to make payments to a lender.
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. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Arizona Premier Realty Homes & Land LLC., the loan process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and review your credit history for free 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.