First-Time Buyer's Guide to Better Credit
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. Without an acceptable FICO score, entering into a loan for a house is more difficult and, you could find yourself renting for another couple of years in Fort Myers, Florida 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. The score ranges from 300 to 850, with most people normally having a score of 650. With the change in the economy, however, some borrowers have seen their score lowered as a result of unemployment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in deciding your FICO score are:
- 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?
When you pull your credit report, you'll discover 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. This means you have three scores, one for each scoring model.
Lenders want to be positive that allowing you a loan isn't a risk for them. Your FICO score gives lenders a view of 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 700 or higher to get an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double that of an individual having a superior FICO score.
I'm used to working with all tiers of FICO scores. Call me at 2393623173 and I can help you get on the right track to the home of your dreams.
There are plans to increase your score. Improving your FICO score takes time. It can be rare to make a significant 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 using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these pointers:
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts maintain an active status. But, pay them off in one or two payments.
- Pay on time. Your FICO score plummets with every account that goes to collections. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to show that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you find 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.
- Spread your debt around. At first, this doesn't sound like a good idea. But, you don't want to have one card that is at the limit 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 the most of your debt transferred to a single card.
- Apply for gas station cards or chain store credit. For those who have no credit or below average credit, store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and stay on top of your payments, which will raise your FICO score. You should always avoid keeping a large balance for more than a couple of months because these types of cards normally have a steeper interest rate.
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 adverse effects on your credit score. With the help of RockStar Realty, the loan process is sure to go more smoothly so you, too, can achieve home ownership.
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.
I work with all tiers of credit history and can help you settle into home ownership with the right lending insitution for you. E-mail me at firstname.lastname@example.org or call 2393623173 for more information.