Tips on Increasing Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. To realize your goal of owning a home, considering your credit score is a must along with the type of loan for which you'll qualify in Albemarle.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 650, but scores are tiered from 300 to 850. Since we've experienced an economic downturn, however, some people have seen their score drop by hundreds of points because of unemployment, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in calculating your FICO score are:
- 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?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
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 credit score gives lenders an insight into what type of borrower you'll be solely because of 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. You can get approved for a loan with a lower score, but the interest accrued over time could be more than double that of someone having a stronger FICO score.
We're used to working with all levels of FICO scores. Call us at 7049856817 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 it? Improving your FICO score takes time. It can be rare to make a large-scale change in your FICO score with quick fixes, but your score can improve in a year or two 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:
- Apply for gas station cards or department store credit. For those who have no credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and have a solid payment history, which will raise your credit. You must always beware of keeping a large balance for too long because these types of cards normally have a steeper interest rate.
- Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts maintain an active status. But, pay them off in one or two payments.
- Stay on top of payments. Your credit score plummets with each account that goes to collections. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit this way, but it's the most reliable way to show 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 asking 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 don't want to have one card that is holding the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have the bulk of your debt taking up the balance a single card.
Knowing the methods you can use to improve your credit score, you can move toward becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid adverse effects on your credit score. With the help of Glen Alford Realty , the loan process can be a stress-free experience so you, too, can achieve home ownership.
Learn more about FICO scores at 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.