Ways to Improve Your FICO Score for Home Buying
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. Without a reasonable credit score, entering into a loan for a house is more difficult and, you could find yourself renting longer than you expected in Pittsburgh until you raise your score.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. In recent years, however, some people have seen their score drop by hundreds of points as a result of underemployment, delinquent credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in calculating your FICO score are:
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many times do you make late payments?
Lenders want to be positive that allowing you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you'd be solely because of your credit history. You'll need a score of at least 740 to get a acceptable interest rate. You'll still get approved for a mortgage loan with a lower score, but the interest accumulated over time could be more than double the amount of an individual having a superior credit score.
Getting your credit in order 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.
There are ways to boost your score. Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these pointers:
- Chain store cards and gas cards. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your FICO score. You should always avoid maintaining a large 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're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. But, make sure you pay them off in one or two payments.
- Stay on top of payments. Delinquent payments drastically lower your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
- Correct your credit report. If you discover incorrect items 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.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you don't want to have one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the majority of your debt transferred to one card.
Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Know that when it's time 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 Hanley Agency, Inc., the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
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.