Ways to Raise Your FICO Score for Home Buying
You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. 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 Valencia, California.
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 traditionally having a score of 650. In recent years, however, some people have seen their score drop dramatically after underemployment, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in calculating your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
Lenders want to make sure that giving you a loan isn't a risk for them. Your credit score gives lenders an insight into what type of borrower you'll be based solely on your credit history. You'll need a score of at least 700 to get a decent 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 with a better FICO score.
Getting your credit in order is the best way to ease into purchasing a home. Call us at 661-373-9973 and we can help you get on the right track to the home of your dreams.
There are plans to raise your score. Improving your FICO score takes time. It can be difficult to make a significant change in your FICO score with small changes, but your score can improve in a few years 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 tips:
- 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 to make sure your accounts maintain an active status. But, pay them off in one or two payments.
- Keep up with payments. Payment history is a big factor in your credit score. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable way to prove that you're able to make payments to a bank.
- Correct your credit report. If you discover incorrect items 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 want to avoid of having 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 an even balance than to have the bulk of your debt transferred to a single card.
- Apply for gas cards or store credit. For those who have non-existent credit or low credit, 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 should always beware of holding a large balance for more than a couple of months because these types of cards traditionally have a surprisingly high interest rate.
Knowing the ways you can raise your credit score, you can move toward becoming a homeowner. Keep in mind that when you're ready 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 Scenic Hills Realty, the loan process can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at 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.