Improving Your FICO Score for Home Ownership
The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you lack an acceptable credit score to back it up, you could end up renting longer than you expected in Jacksonville until you raise your score.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with most people traditionally having a score of 650. Since we've experienced an economic downturn, 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 determining your FICO score are:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — Do you pay your bills on time ?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
Lenders want to ensure that allowing you a loan isn't a risk for them. Your credit score gives lenders a view of what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. You'll still qualify for a loan with a lower score, but the interest paid over the life of the loan could be more than double the amount of someone with a near perfect credit score.
We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
You want a stronger score, but how do you get there? Building your FICO score takes time. It can be rare to make a significant change in your FICO 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. Here are some ways you can improve your credit score:
- Even out your debt. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have the majority of your debt sitting on one card.
- Store cards and service station cards. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to improve credit, increase your credit limits and keep up your payments, which will raise your credit. You should always beware of holding a high balance for more than a couple of months because these types of cards more than likely have a larger 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, be sure to pay them off in one or two payments.
- Pay on time. Delinquent payments drastically lower your credit score. It's one of the reasons people who have recently experienced job loss 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 prove that you're responsible enough to make payments to a bank.
- Ensure that your credit history is correct. If you discover incorrect items 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 methods you can use to raise your credit score, you're one step closer to becoming a homeowner. Remember that when it's time to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Choice Jacksonville Realty, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Learn more about FICO scores at myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.