Ways to Raise Your FICO Score for Home Buying
Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of loan for which you'll qualify in Sunset Beach, North Carolina.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people usually 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 because of job loss, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in deciding your FICO score include:
- 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?
- Payment History — Do you pay your bills on time every month?
Lenders want to ensure that giving you a loan isn't a risk for them. Your credit score gives lenders an insight into what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over the life of the loan could be more than double the amount of an individual with a better FICO score.
We're used to working with all tiers of credit 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 there? Building your FICO score takes time. It can be difficult to make a significant stride change in your FICO score with quick fixes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Pay on time. Late payments kill your credit history. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a bank.
- Correct your credit report. If you discover incorrect items 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 give extra care to make sure the activity reported is correct.
- Even out your debt. 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 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 the majority of your debt sitting on one card.
- Chain store cards and service station cards. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You must always avoid holding a large balance for more than a couple of months because these types of cards normally have a steeper interest rate.
- Don't let your cards get dusty. 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 maintain an active status. But, be sure to pay them off in no more than two or three payments.
Knowing the methods you can use to raise 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 applications within a two-week window to avoid damaging your credit score. With the help of Fred Thorne Realty LLC, 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.