Scoring Your FICO

The home buying process doesn't start with getting pre-approved for a loan 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 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 traditionally have a score of 600, but scores are tiered from 300 to 850. With the change in the economy, however, some people have seen their score lowered after job loss, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in summing up your FICO score include:

• 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 credit cards and loans?
• Payment History — How many months do you make late payments?
• Credit to Debt Ratio — How much do you owe versus your available credit?

In reviewing your credit history, you'll find 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 bureau.

Lenders want to ensure that giving you a loan is a safe move. Your credit score gives lenders a view of what type of borrower you'll be solely because of your credit history. You'll need a score of at least 740 to get a acceptable interest rate. You can qualify for a mortgage loan with a lower score, but the interest paid over the life of the loan could be more than double the amount of someone with a higher credit score.

We're used to working with all levels of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.

You want an improved score, but how do you get it? Improving your FICO score takes time. It can be hard to make a significant change in your number with quick fixes, but your score can improve in a few years 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. Here are some methods to improve your credit score:

• 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 to make sure your accounts maintain an active status. But, make sure you pay them off in one or two payments.
• Stay on top of payments. How often you're late with payments greatly affects your credit score. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the most reliable way to prove that you're responsible enough to make payments to a bank.
• Correct your credit report. If you find mistakes on your credit report, write to 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.
• Even out your debt. At first, this doesn't seem like a good idea. But, you steer clear of having 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 20% of their credit limit than to have the bulk of your debt sitting on one card.
• Store cards and gas station cards. 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 stay on top of your payments, which will raise your FICO score. You must always beware of carrying a high balance for too long because these types of cards more than likely have a surprising interest rate.

Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Remember that when you're ready to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid a negative mark 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.

Get more information by visiting myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.