How's Your Credit?
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 lender for which you'll qualify in Castro Valley, California.
A FICO score is a collection 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 600. In recent years, however, some borrowers have seen their score lowered after loss of employment, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in reviewing your FICO score include:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time ?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
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 credit score gives lenders a view of what type of borrower you'd 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 a decent interest rate. You'll still qualify for a mortgage with a lower score, but the interest paid in the long run could be more than double that of an individual having a near perfect FICO score.
Improving your FICO score is the best way to ease into owning a home. Contact us and we can help you get on the right track to the home of your dreams.
There are strategies to raise your score. Building your FICO score takes time. It can be hard to make a significant change in your FICO score with quick fixes, but your score can improve in a year 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 tips:
- 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 so that your accounts stay active. But, make sure you pay them off in no more than two or three payments.
- Stay on top of payments. Payment history is a huge factor in your FICO score. It's one of the reasons 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.
- Ensure that your credit history is correct. If you find mistakes 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.
- Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the limit 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 all of your debt sitting on one card.
- Retail cards and gas station cards. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to repair credit, increase your spending limits and keep up your payments, which will raise your credit. You must always beware of charging a large balance for more than a couple of months because these types of cards usually have a steeper interest rate.
Knowing the ways you can improve your credit score, you're one step closer to becoming a homeowner. Know 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 damaging your credit score. With the help of Intero Real Estate Services, 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.