FICO - The First Step to Owning
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. To realize your goal of owning a home, considering your credit score is a must along with the type of lender for which you'll qualify in San Diego, California.
A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people traditionally having a score of 600. Since we've experienced an economic downturn, however, some people have seen their score drop dramatically because of loss of employment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in reviewing 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 — Do you pay your bills on time each month?
Lenders want to make sure that giving you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you'll be based solely on 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 can qualify for a mortgage with a lower score, but the interest paid over time could be more than double the amount of an individual having a near perfect FICO score.
Getting your credit in order is the first step in buying a home. Contact us and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a significant change in your number with small changes, but your score can improve in a year or two by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:
- Stay on top of payments. Late payments hurt your FICO score. It's one of the reasons people who have recently been unemployed 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 lender.
- Ensure that your credit history is correct. If you find 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 seem like a good idea. But, you don't want to have 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 about 20% of their credit limit than to have the bulk of your debt sitting on one card.
- Apply for gas station cards or chain store credit. For those who have non-existent credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to start 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 more than a couple of billing cycles because these types of cards traditionally have a larger interest rate.
- Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts stay active. But, be sure to pay them off in one or two payments.
Knowing the ways you can improve your credit score, you're one step closer to becoming a homeowner. Know 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 Sand & Sea Realty, shopping for a mortgage is sure to go more smoothly 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.