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 a strong fico score (credit score) to reinforce it, you could find yourself renting longer than you expected in Palm Beach County until you improve your score.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people normally having a score of 650. With the change in the economy, however, some people have seen their score drop dramatically as a result of loss of employment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity.
Some of the factors in deciding your FICO score are:
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How often do you make late payments?
- Credit to Debt Ratio — How much do you owe versus how much credit you have available?
Lenders want to make sure that allowing you a loan isn’t a risk for them. Your FICO score gives lenders a view of what type of borrower you’d be based solely on your credit history. You’ll need a score of at least 700 to get a satisfactory interest rate. You’ll still qualify for a mortgage loan with a lower score, but the interest accrued over the life of the loan could be more than double that of someone with a better FICO score.
Improving your FICO is the best way to ease into buying a home. Call me at 5616337626 and I 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? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by wisely using credit. The most important thing is to know your FICO score.
You’ll improve your credit score by using these pointers:
- Correct your credit report. 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.
- Spread your debt around. 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 all of your debt transferred to a single card.
- Apply for service station cards or retail credit. For those who have no credit or below average credit, chain store credit cards and gas credit cards are ways to repair credit, increase your spending limits and have a solid payment history, which will raise your FICO score. You must always avoid keeping a high balance for more than a couple of months because these types of cards more than likely have a surprising interest rate.
- Don’t let your cards get dusty. Whether you’re just getting started with credit, or if you’ve got older cards, use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
- Pay on time. Delinquent payments instantly lower your credit score. It’s one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it’s the most reliable way to show that you’re able to make payments to a lender.
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 home, you’ll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Atlantic Grove Realty, shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac’s informational site, and once per year, for free, you can review all three of your credit reports 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.
I work with all tiers of credit scores and can help you step into homeownership with the right lender for you. E-mail me at atlanticgroverealty@yahoo.com or call 5616337626 for additional information.