Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. Without an acceptable credit score, buying a house is more difficult and, you could find yourself renting longer than you expected in Collier County until you improve your score.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores range from 300 to 850. Since we've experienced an economic downturn, however, some people have seen their score drop dramatically after unemployment, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in deciding your FICO score include:
- 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 often do you make late payments?
- Credit to Debt Ratio — How much do you owe versus your available credit?
Lenders want to ensure that giving you a loan isn't a risk for them. Your FICO score gives lenders view of 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 an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated over time could be more than double the amount of an individual having a stronger credit score.
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Getting your credit in order is the best way to ease into purchasing a home. Call us at 239-571-8837 and we can help you get on the right track to the home of your dreams.
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You want an improved score, but how do you get it? Building your FICO score takes time. At STEVEN R LINDBURG, P.A. Anchor Real Estate, we know it's difficult to make a significant change in your credit score with quick fixes, but your score can improve in a year or two by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Keep up with payments. How often you're late with payments greatly affects 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 rebuild your credit this way, but it's the surest way to prove that you're responsible enough to make payments to a lender.
- Correct your credit report. 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 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 don't want to have one card that is holding the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have all of your debt transferred to one card.
- Retail cards and gas cards. For those who have non-existent 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 FICO score. Just avoid keeping a large balance for more than a couple of two because these types of cards usually have a surprising interest rate.
- Keep your cards in rotation. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.
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Knowing the methods you can use raise your credit score, you can move toward becoming a homeowner. Know that when you're ready to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid adverse effects your credit score. With the help of STEVEN R LINDBURG, P.A. Anchor Real Estate, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting 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 STEVEN R LINDBURG, P.A. Anchor Real Estate we work with all tiers of credit and can help you get back into home ownership with the right lender for you. E-mail us at Steve@stevelindburg.com or call 239-571-8837 for additional information.
