Scoring Your Credit - How's Your Credit Score
Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet starts the home buying process. Without an acceptable credit score, entering into a loan for a house is harder and, you could find yourself renting for another couple of years in Fort Worth, Texas until you build up your score.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people normally having a score of 600. In recent years, however, some borrowers have seen their score drop dramatically as a result of underemployment, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in determining your FICO score include:
- 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 your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
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 solely because of your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated over the life of the loan could be more than double the amount of an individual with a higher credit score.
We're used to working with all levels of credit scores. Contact us 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? Building your FICO score takes time. It can be rare to make a significant change in your number with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Pay on time. Your FICO score plummets with each account that goes to collections. 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 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, 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 give extra care to make sure the activity reported is correct.
- Even out your debt. 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 your remaining cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have all of your debt taking up the balance one card.
- Apply for service station cards or store credit. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to repair credit, increase your credit limits and keep up your payments, which will raise your credit. You should always beware of carrying a high balance for too long because these types of cards usually have a steeper interest rate.
- Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, make sure you pay them off in one or two payments.
Knowing the methods you can use to raise your credit score, you're one step closer to becoming a homeowner. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of DFW Skyline Realty, the loan application 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.