Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To make your goal of homeownership realized, considering your credit score is a must along with the type of loan for which you'll qualify in Gaston County.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 650, but scores range from 300 to 850. Even though more people these days are experiencing job loss and delinquent credit cards, FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a loan. Some of the pieces in summing up your FICO score are:
- 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 credit cards and loans?
- Payment History — How many late payments have you made?
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 credit score gives lenders insight into what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a acceptable interest rate. You can get approved for a mortgage loan with a lower score, but the interest paid in the long run could be more than double the amount of someone with a near perfect credit score.
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Improving your FICO is the best way to ease into purchasing a home. Call us at 980.230.9632 and we can help you get on the right track to the home of your dreams. |
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How do you get a stronger score? Improving your FICO score takes time. At Keyes Real Estate Services, we know it's difficult to make a significant 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 credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:
- Use your credit. 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 one or two payments.
- Pay on time. Delinquent payments drastically lower your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to restore your credit this way, but it's the most reliable way to prove that you're able to make payments to a lender.
- Ensure that your credit history is correct. If you discover 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 pay extra attention to make sure the activity reported is correct.
- 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 holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at about 30% of their credit limit than to have the most of your debt sitting on a single card.
- Apply for gas 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 stay on top of your payments, which will raise your FICO score. Just avoid keeping a high balance for too long because these types of cards more than likely have a steeper interest rate.
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Now that you're better 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 house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Keyes Real Estate Services, shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at 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.
At Keyes Real Estate Services we work with all levels of credit and can help you settle into home ownership with the best mortgage lender for you. E-mail us at mykeyes@myhomeandkeyes.com or call 980.230.9632 for additional information.
