Increasing Your FICO Score for Home buyers
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins and ends with your finances. To realize your goal of owning a home, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Winston-Salem.
The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people traditionally having a score of 650. In recent years, however, some people have seen their score drop dramatically as a result of underemployment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in deciding your FICO score are:
- Payment History — How many months do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
Lenders want to make sure that giving you a loan is a safe move. Your credit score gives lenders an insight into what type of borrower you'll be based solely on your credit history. You'll need a score of at least 700 to get a decent interest rate. You'll still get approved for a loan with a lower score, but the interest paid in the long run could be more than double that of an individual with a superior credit score.
We're used to working with all tiers of credit scores. Call us at (336) 722-9911 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 rare to make a significant stride change in your FICO score 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:
- Ensure that your credit history is correct. If you find mistakes 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 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 steer clear of having 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 less than 40% of their credit limit than to have the majority of your debt taking up the balance one card.
- Store cards and gas cards. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to get credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always avoid maintaining a high balance for more than a couple of months because these types of cards usually have a larger interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts stay active. But, pay them off in no more than two or three payments.
- Keep up with payments. Payment history is a big factor in your credit score. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to prove that you're responsible enough to make payments to a bank.
Now that you know more 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 adverse effects on your credit score. With the help of John-Mark Mitchell's Realty Group, shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
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.