Home buyer's Guide to Better Credit
You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet begins the home buying process. To make your goal of homeownership realized, considering your credit score is a must along with the type of lender for which you'll qualify in Palm Springs, California.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people traditionally having a score of 600. In recent years, however, some borrowers have seen their score drop dramatically as a result of underemployment, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in summing up your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many months do you make late payments?
- 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?
In reviewing your credit history, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each scoring model.
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 FICO score gives lenders an insight into what type of borrower you are solely because of your credit history. You'll need a score of at least 740 to get a decent interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over time could be more than double that of an individual having a near perfect FICO score.
Getting your credit in order is the first step in owning a home. Call us at (760) 328-3381 and we can help you get on the right track to the home of your dreams.
There are plans to increase your score. Improving your FICO score takes time. It can be rare to make a significant change in your credit score with quick fixes, but your score can improve in a few years by keeping tabs 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 helpful hints:
- Retail cards and service station cards. For those who have no credit or below average credit, department store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and keep up your payments, which will raise your credit. You must always beware of maintaining a high balance for more than a couple of billing cycles because these types of cards traditionally have a larger interest rate.
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
- Stay on top of payments. Late payments hurt your credit score. It's where people who have recently experienced job loss see the biggest dip 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 able to make payments to a bank.
- 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 sound like a good idea. But, you steer clear of having one card that is at 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 majority of your debt transferred to a single card.
Knowing the ways you can build up 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 lender applications within a two-week window to avoid damaging your credit score. With the help of GDW Realty, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.
We won't judge you based on your credit scores and can help you get back into home ownership with the best lender for you. E-mail us at firstname.lastname@example.org or call (760) 328-3381 for additional information.