Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. Without an above average credit score, purchasing a house is more difficult and, you could end up renting for another couple of years in Hilo, Hawaii until you improve your score. 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 range from 300 to 850. 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 credit. Some of the pieces in deciding 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 late payments have you made?
- 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 models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with all of the bureaus.
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 view of what type of borrower you are based solely on your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated over time could be more than double that of someone with a better FICO score.
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 | Staying on top of your FICO score is the first step in owning a home. Contact us and we can help you get on the right track to the home of your dreams. | | |
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How do you boost your credit score? Building your FICO score takes time. At Prudential Orchid Isle Properties, we know it's rare to make a significant stride change in your FICO score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these pointers:
- Correct your credit report. 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 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 want to avoid of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have all of your debt sitting on one card.
- Department Store cards and service station cards. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to improve credit, increase your spending limits and keep up your payments, which will raise your FICO score. Simply beware of holding a high balance for more than a couple of billing cycles because these types of cards usually have a surprising 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 stay active. But, make sure you pay them off in one or two payments.
- Pay on time. Your FICO score plummets with each account that goes to collections. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a bank.
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Now that you're better 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 house, you'll want to keep your applications within a two-week window to avoid adverse effects your credit score. With the help of Prudential Orchid Isle Properties, shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and review your credit history for free at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
At Prudential Orchid Isle Properties we work with all levels of credit history and can help you get back into home ownership with the best lending insitution for you. E-mail us at patti@pattikam.com or call 808-960-3198 for additional information.
