Scoring Your Credit - How's Your Credit Score
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. Saving your money for a down payment is great, but if you don't have an acceptable credit score to back it up, you could end up renting longer than you expected in Aurora until you improve your score.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. 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 loan. Some of the pieces in determining your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many times do you make late payments?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
In reviewing your credit history, you'll find 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 scoring model.
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 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 700 or higher to get an acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of an individual with a better credit score.
We're used to working with all tiers of FICO scores. Call us at 303-696-0606 and we can help you get on the right track to the home of your dreams.
There are ways to boost your score. Improving your FICO score takes time. It can be rare to make a significant change in your number with quick fixes, but your score can improve in a year 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 tips:
- Pay on time. How often you're late with payments greatly affects 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 build up your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a bank.
- Correct your credit report. If you discover incorrect items on your credit report, write to 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 sound like a good idea. But, you don't want to have 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 smaller balance than to have the majority of your debt transferred to a single card.
- Chain Store cards and service station cards. For those who have non-existent credit or low credit, chain store credit cards and gas credit cards are ways to get credit, increase your credit limits and keep up your payments, which will raise your credit. You should always avoid maintaining a large balance for more than a couple of billing cycles because these types of cards traditionally have a higher interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.
Now that you're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Know 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 a negative mark on your credit score. With the help of ReMax Unlimited @ Cherry Creek Reservoir, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.
Learn more about FICO scores at www.myFICO.com, Fair Isaac's informational site and review your credit history for free at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
We won't judge you based on your credit and can help you settle into home ownership with the best lending insitution for you. E-mail us at firstname.lastname@example.org or call 303-696-0606 for more information.