Ways to Raise Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. To become a homeowner, considering your credit score is a must along with the type of loan for which you'll qualify in Newburgh, New York.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, but scores range from 300 to 850. With the change in the economy, however, some borrowers have seen their score lowered because of loss of employment, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in reviewing your FICO score are:
- Payment History — Do you pay your bills on time each month?
- 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?
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 a view of what type of borrower you'd be 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. You'll still get approved for a mortgage loan with a lower score, but the interest accrued over time could be more than double that of someone with a superior FICO score.
Getting your credit in order is the best way to ease into buying a home. Call us at (845) 567-6789 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 difficult to make a significant change in your credit score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by wisely using credit. 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 don't want to have 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 20% of their credit limit than to have the majority of your debt transferred to a single card.
- Retail cards and service station cards. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to get credit, increase your spending limits and have a solid payment history, which will raise your FICO score. You must always avoid maintaining a high balance for too long because these types of cards usually have a surprisingly high interest rate.
- Use your credit. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, pay them off in one or two payments.
- Stay on top of payments. Payment history is a huge factor in 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 rebuild your credit with payment history, but it's the surest way to show that you're able to make payments to a bank.
- Correct your credit report. If you find incorrect items 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 pay extra attention to make sure the activity reported is correct.
Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Remember 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 Countryman Real Estate Associates, 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 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.