Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Without an above average credit score, entering into a loan for a house is harder and, you could find yourself renting for another couple of years in Chula Vista until you raise your score.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of 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 underemployment, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in summing up your FICO score include:
- Payment History — How many late payments have you made?
- 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?
In reviewing your credit history, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, 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 risk. Your credit score gives lenders view of what type of borrower you'd be 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 an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over the life of the loan could be more than double the amount of someone having a near perfect FICO score.
 |
 |
 |
We're used to working with all tiers of credit history. Call us at (619)822-2371 and we can help you get on the right track to the home of your dreams.
|
|
|
|
|
You want a stronger score, but how do you get there? Improving your FICO score takes time. At Allstar Mortgage and Real Estate, we know it's difficult to make a large-scale change in your number 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 ways you can improve your credit score:
- Ensure that your credit history is correct. If you discover incorrect items 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 give extra care to make sure the activity reported is correct.
- Spread your debt around. 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 a smaller balance than to have the most of your debt transferred to one card.
- Store cards and gas station cards. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to repair credit, increase your credit limits and have a solid payment history, which will raise your FICO score. Just beware of charging a balance for too long because these types of cards more than likely have a steeper interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards to make sure your accounts stay active. But, make sure you pay them off in no more than two or three payments.
- Pay on time. Payment history is a huge factor in your credit score. It's one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable way to show that you're able to make payments to a bank.
|
Knowing the methods you can use build your credit score, you can move toward 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 adverse effects your credit score. With the help of Allstar Mortgage and Real Estate, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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 Allstar Mortgage and Real Estate we don't judge you based on your credit scores and can help you step into home ownership with the right lending insitution for you. E-mail us at allstarrealestate@gmail.com or call (619)822-2371 for additional information.
