How's Your Credit?
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process begins with your finances. Without an above average FICO score, purchasing a house is harder and, you could find yourself renting longer than you expected in Muskogee, Oklahoma until you improve your score.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, but scores range from 300 to 850. Since we've experienced an economic downturn, however, some people have seen their score lowered after underemployment, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in reviewing your FICO score are:
- 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 — How many late payments have you made?
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 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 three 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 FICO score gives lenders a view of 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. You can get approved for a mortgage loan with a lower score, but the interest paid over the life of the loan could be more than double the amount of someone with a higher credit score.
We're used to working with all tiers of credit history. Call us at (918)348-9250 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 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. You'll improve your credit score by using these helpful hints:
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, make sure you pay them off in one or two payments.
- Stay on top of payments. Payment history is a big factor in 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 restore your credit this way, but it's the surest way to prove 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.
- Spread your debt around. 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 an even balance than to have all of your debt taking up the balance 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 obtain credit, increase your spending limits and keep up your payments, which will raise your FICO score. You should always beware of keeping a high balance for too long because these types of cards usually have a higher interest rate.
Now that you're better informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Keep in mind 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 adverse effects on your credit score. With the help of Leslie Scott Realty, LLC, the loan process can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at 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.