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, you must consider your FICO score along with the type of loan for which you'll qualify in Cumberland, Rhode Island.
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 are tiered from 300 to 850. Since we've experienced an economic downturn, however, some borrowers have seen their score drop by hundreds of points as a result of job loss, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in deciding your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How often do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- 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 solely because of your credit history. You'll need a score of at least 700 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued in the long run could be more than double that of an individual with a near perfect FICO score.
We're used to working with all tiers of FICO scores. Call us at (401) 723-3300 and we can help you get on the right track to the home of your dreams.
You want a higher score, but how do you get there? Improving your FICO score takes time. It can be difficult to make a significant change in your credit score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:
- Keep up with payments. How often you're late with payments greatly affects your credit score. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to build up your credit this way, but it's the surest way to show that you're able to make payments to a lender.
- 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 don't want to have one card that is at the limit and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the majority of your debt transferred to a single card.
- Store cards and gas cards. For those who have no credit or below average credit, store credit cards and gas credit cards are ways to improve credit, increase your credit limits and have a solid payment history, which will raise your FICO score. You should always avoid carrying a large balance for too long because these types of cards more than likely have a steeper interest rate.
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
Knowing the methods you can use to raise your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Reliable Realty Group, shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.
To learn more, visit 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.