Scoring Your Credit - How's Your Credit Score
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. To become a homeowner, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Guerneville.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores are tiered from 300 to 850. Even though more people these days are experiencing job loss and delinquent credit cards, FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a decent interest rate. Some of the pieces in summing up your FICO score are:
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time ?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
Lenders want to make sure that giving 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. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get a satisfactory interest rate. You'll still qualify for a loan with a lower score, but the interest accrued over the life of the loan could be more than double the amount of an individual with a superior credit score.
Getting your credit in order is the first step in purchasing a home. Call us at 707-303-6358 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? Building your FICO score takes time. It can be hard to make a significant stride change in your number with small changes, but your score can improve in a few years 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. Here are some methods to improve your credit score:
- Use your credit. 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 one or two payments.
- Stay on top of payments. Payment history is a huge factor in your credit score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to prove that you're responsible enough to make payments to a bank.
- Ensure that your credit history is correct. If you find mistakes on your credit report, contact the bureau requesting 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 sound 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 about 25% of their credit limit than to have the majority of your debt taking up the balance a single card.
- Apply for gas cards or retail credit. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to improve credit, increase your spending limits and stay on top of your payments, which will raise your credit. You must always beware of charging a high balance for too long because these types of cards usually have a higher interest rate.
Knowing the ways you can raise 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 applications within a two-week window to avoid adverse effects on your credit score. With the help of Your City Country Connection, 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 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.