The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. Without an above average credit score, entering into a loan for a house is more difficult and, you could find yourself renting longer than you expected in Pacific Grove until you build your score.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 650, but scores range from 300 to 850. In recent years, however, some borrowers have seen their score drop dramatically because of loss of employment, delinquent 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 — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
In reviewing your credit history, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. This means you have three scores, one for each scoring model.
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 insight into what type of borrower you are solely because of your credit history. You'll need a score of at least 700 to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of someone with a higher credit score.
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We're used to working with all tiers of credit history. Call us at (831)375-2183x103 and we can help you get on the right track to the home of your dreams.
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There are plans to increase your score. Improving your FICO score takes time. At Bratty & Bluhm Real Estate, we know it's hard to make a significant stride change in your number with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:
- Apply for service station cards or retail credit. For those who have no credit or below average credit, store credit cards and gas credit cards are ways to repair credit, increase your credit limits and keep up your payments, which will raise your FICO score. Just beware of holding a large balance for too long because these types of cards traditionally have a higher 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, make sure you pay them off in one or two payments.
- Keep up with payments. Late payments hurt your credit history. 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 this way, but it's the surest way to show that you're able to make payments to a bank.
- Ensure that your credit history is correct. If you find mistakes 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 sound like a good idea. But, you steer clear 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 25% of their credit limit than to have the bulk of your debt taking up the balance a single card.
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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. Know that when it's time to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid a negative mark on your credit score. With the help of Bratty & Bluhm Real Estate, the loan process is sure to go more smoothly so you, too, can achieve home ownership.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and review your credit history for free 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.
At Bratty & Bluhm Real Estate we don't judge you based on your FICO scores and can help you get back into home ownership with the best lending insitution for you. E-mail us at joe@brattyandbluhm.com or call (831)375-2183x103 for additional information.
