FICO - The First Step to Home Ownership
Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. Without an acceptable FICO score, entering into a loan for a house is more difficult and, you could find yourself renting for another couple of years in Fayetteville, North Carolina until your FICO score is acceptable.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 650, but scores range from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is a low score and that often means you can't get credit extended to you via a mortgage loan. Some of the pieces in reviewing your FICO score include:
- Payment History — Do you pay your bills on time ?
- 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 FICO score gives lenders an insight into what type of borrower you are solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 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 an individual having a better credit score.
We're used to working with all levels of credit history. Call us at 9102613559 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? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with quick fixes, but your score can improve in a year by keeping tabs your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Correct your credit report. If you find mistakes on your credit report, write to 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 give extra care 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 maximum and have the rest of your 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 one card.
- Retail cards and gas station cards. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You should always beware of charging a large balance for too long because these types of cards more than likely have a surprisingly high interest rate.
- 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 stay active. But, pay them off in one or two payments.
- Stay on top of payments. Payment history is a big factor in your credit score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the most reliable way to show that you're able to make payments to a bank.
Now that you're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, 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 Alotta Properties, Inc, 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 once per year, for free, you can review all three of your credit reports 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.