Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Rolling Hills Estates.
The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores are tiered 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 just that and often means you can't get a decent interest rate. Some of the factors in calculating your FICO score are:
- 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 — How many times has your credit history been accessed by someone other than you?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
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 FICO score gives lenders view of what type of borrower you are based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued in the long run could be more than double that of an individual with a higher credit score.
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Staying on top of your FICO score is the first step in purchasing a home. Contact us and we can help you get on the right track to the home of your dreams.
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You want a stronger score, but how do you get it? Improving your FICO score takes time. At Peninsula Properties, we know it's difficult to make a significant change in your number with small changes, but your score can improve in a year by keeping tabs 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:
- 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 maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at a lower balance than to have the most of your debt taking up the balance a single card.
- Retail cards and gas station cards. For those who have non-existent credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your FICO score. Simply beware of carrying a high balance for too long because these types of cards more than likely have a larger interest rate.
- Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, pay them off in one or two payments.
- Keep up with payments. Late payments hurt your credit history. 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 build up your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a lender.
- Ensure that your credit history is correct. If you find mistakes 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 pay extra attention to make sure the activity reported is correct.
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Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Remember that when it's time to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Peninsula Properties, the loan application process 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 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 Peninsula Properties we work with all tiers of credit history and can help you settle into home ownership with the best mortgage lender for you. E-mail us at pvhomes@pvhomes.net or call (310)377-0987 for additional information.
