FICO - The First Step to Home Ownership
Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process begins with your finances. 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 Guerneville, California.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people usually have a score of 650, but scores range from 300 to 850. In recent years, however, some borrowers have seen their score drop by hundreds of points because of 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 calculating your FICO score are:
- Payment History — Do you pay your bills on time every month?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
Lenders want to ensure that giving you a loan isn't a risk for them. Your FICO score gives lenders an insight into what type of borrower you'll be based solely on 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 an acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated over the life of the loan could be more than double that of an individual with a better FICO score.
Improving your FICO score is the first step in buying a home. Call us at 707-303-6358 and we can help you get on the right track to the home of your dreams.
There are plans to increase your score. Building your FICO score takes time. It can be difficult to make a large-scale change in your credit score with quick fixes, 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:
- 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 rebuild your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
- Ensure that your credit history is correct. If you discover incorrect items 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.
- Even out your debt. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is maxed out 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 most of your debt taking up the balance a single card.
- Apply for service station cards or department store credit. For those who have non-existent credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and have a solid payment history, which will raise your FICO score. You should always avoid holding a large balance for too long because these types of cards usually have a surprising interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. 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. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of Your City Country Connection, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
Get more information by visiting 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.