How's Your FICO?
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of lender for which you'll qualify in Fort Worth, Texas.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 650, but scores range from 300 to 850. With the change in the economy, however, some borrowers have seen their score drop by hundreds of points as a result of job loss, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- 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?
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 models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with all of the bureaus.
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 an insight into what type of borrower you are based solely on your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. You can get approved for a mortgage with a lower score, but the interest paid over time could be more than double that of an individual with a superior FICO score.
Improving your FICO is the best way to ease into buying a home. Contact us 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 it? Building your FICO score takes time. It can be hard to make a significant change in your number with small changes, 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:
- Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having 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 20% of their credit limit than to have the most of your debt sitting on one card.
- Retail 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 FICO score. You must always avoid keeping a large balance for too long because these types of cards more than likely have a surprisingly high interest rate.
- Keep your cards active. 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 one or two payments.
- Keep up with payments. Delinquent payments instantly lower your credit score. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the surest way to show that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you discover mistakes on your credit report, write to 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.
Knowing the ways you can raise your credit score, you can move toward 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 process can be a stress-free experience 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.