Tips on Raising Your FICO Score for Home Buying
The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet starts the home buying process. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Orlando.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 600, but scores range from 300 to 850. In recent years, however, some people have seen their score drop by hundreds of points after loss of employment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in summing up your FICO score include:
- 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 how much credit you have available?
- Credit Inquiries — Do you have too many open accounts?
Lenders want to be positive that allowing you a loan is a safe move. 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 satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of someone with a better credit score.
Staying on top of your FICO score is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.
How do you boost your credit score? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with small changes, but your score can improve in a year or two 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. You'll improve your credit score by using these pointers:
- Spread your debt around. 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 about 30% of their credit limit than to have the most of your debt sitting on a single card.
- Apply for service station cards or store credit. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and have a solid payment history, which will raise your credit. You must always beware of charging a high balance for too long because these types of cards normally have a steeper interest rate.
- Keep your cards in rotation. 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, pay them off in one or two payments.
- Stay on top of payments. Payment history is a huge factor in your FICO score. It's where 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 surest way to prove that you're responsible enough to make payments to a bank.
- Correct your credit report. If you find 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.
Knowing the methods you can use to improve your FICO score, you can move toward becoming a homeowner. 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 a negative mark on your credit score. With the help of RE/MAX Town Centre, the loan process is sure to go more smoothly so you, too, can become a homeowner.
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.