How's Your Credit?
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, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Newburgh.
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 normally having a score of 650. With the change in the economy, however, some people have seen their score drop dramatically because of unemployment, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in summing up your FICO score include:
- Payment History — Do you pay your bills on time every month?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
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 an insight into what type of borrower you are based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a satisfactory interest rate. If your score is lower, 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 having a superior credit score.
We're used to working with all tiers of credit history. Call us at (845) 567-6789 and we can help you get on the right track to the home of your dreams.
There are strategies to improve your score. Building your FICO score takes time. It can be hard to make a significant change in your number with quick fixes, but your score can improve in a few years by keeping tabs your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Keep up with payments. Late payments hurt your FICO score. It's where people who have recently been unemployed 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.
- Correct your credit report. If you discover incorrect items on your credit report, contact 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is maxed out and have the rest of your 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 bulk of your debt sitting on one card.
- Apply for gas cards or retail credit. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to repair credit, increase your spending limits and keep up your payments, which will raise your FICO score. You should always beware of keeping a large balance for more than a couple of billing cycles because these types of cards usually have a surprising 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 stay active. But, make sure you pay them off in no more than two or three payments.
Knowing the methods you can use to build up your FICO score, you can move toward becoming a homeowner. Know that when it's time to apply for a loan to purchase a house, 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 Countryman Real Estate Associates, the loan application process can be a stress-free experience so you, too, can achieve home ownership.
To learn more, visit 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.