Increasing Your FICO Score for Home Buying
You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. Without an above average FICO score, purchasing a house is more difficult and, you could find yourself renting longer than you expected in Tampa until your FICO score is acceptable.
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 a decent interest rate. Some of the pieces in determining your FICO score are:
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
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 determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. As a result, you have three scores, one for each bureau.
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO score gives lenders a view of 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 700 or higher to get an acceptable interest rate. You can get approved for a mortgage with a lower score, but the interest accumulated over time could be more than double the amount of someone having a near perfect credit score.
Improving your FICO is the first step in owning a home. Call us at (813) 259-0000 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? Building your FICO score takes time. It can be difficult to make a significant stride change in your number with quick fixes, but your score can improve in a few years by keeping tabs 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 helpful hints:
- Stay on top of payments. Payment history is a big factor in your FICO score. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to prove that you're able to make payments to a bank.
- Correct your credit report. If you discover incorrect items on your credit report, contact 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.
- Even out your debt. At first, this doesn't seem like a good idea. But, you don't want to have one card that is maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have all of your debt transferred to a single card.
- Department store cards and service station cards. For those who have non-existent credit or less-than-stellar credit, retail 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 must always avoid keeping a large balance for more than a couple of billing cycles because these types of cards traditionally have a higher interest rate.
- Keep your cards active. 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 stay active. But, pay them off in no more than two or three payments.
Knowing the ways you can raise your credit score, you're one step closer to becoming a homeowner. Remember 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 a negative mark on your credit score. With the help of RE/MAX Bay to Bay, the loan application process can be a stress-free experience so you, too, can achieve home ownership.
Get more information by visiting 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.