Scoring Your Credit - How's Your FICO?
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Putting back your money for a down payment is a good idea, but if you don't have an acceptable credit score to reinforce it, you could end up renting longer than you expected in Muskogee, Oklahoma until your score improves.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people normally having a score of 650. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is a low score and that often means you can't get credit extended to you via a mortgage loan. Some of the pieces in summing up your FICO score include:
- Payment History — How many late payments have you made?
- 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?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
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. This means you have three scores, one for each bureau.
When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. 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 acceptable interest rate. You can qualify for a loan with a lower score, but the interest accrued over time could be more than double that of someone with a superior credit score.
We're used to working with all levels of FICO scores. Call us at (918)348-9250 and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a large-scale change in your FICO score with small changes, but your score can improve in a few years by keeping tabs 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 pointers:
- 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, be sure to pay them off in no more than two or three payments.
- Pay on time. Late payments hurt your credit score. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to show that you're responsible enough to make payments to a lender.
- Ensure that your credit history is correct. 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 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 sitting on one card.
- Chain store cards and gas cards. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and have a solid payment history, which will raise your credit. You should always avoid charging a high balance for too long because these types of cards normally have a surprisingly high interest rate.
Now that you know more 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 damaging your credit score. With the help of Leslie Scott Realty, LLC, the loan process can be a stress-free experience 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.