Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of loan for which you'll qualify in El Paso County.
A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 600, but scores range 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 loan. Some of the factors in reviewing your FICO score include:
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — Do you have too many open accounts?
In reviewing your credit history, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems 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 bureau.
Lenders want to ensure that allowing you a loan is a safe move. Your FICO score gives lenders insight into what type of borrower you'll be solely because of your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest paid in the long run could be more than double the amount of someone with a superior FICO score.
|Improving your credit score is the first step in buying a home. Contact me and I can help you get on the right track to the home of your dreams. |
You want an improved score, but how do you get there? Building your FICO score takes time. At Danii Sedillo, Keller Williams Realty, we know it's hard to make a significant change in your credit score with small changes, but your score can improve in a few years by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:
- Correct your credit report. If you find 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.
- Even out your debt. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at an even balance than to have the majority of your debt taking up the balance a single card.
- Store cards and gas cards. For those who have no credit or below average credit, retail credit cards and gas credit cards are ways to obtain credit, increase your spending limits and have a solid payment history, which will raise your credit. Simply avoid carrying a too-high balance for more than a couple of two because these types of cards traditionally have a steeper 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, pay them off in no more than two or three payments.
- Pay on time. Your credit score plummets with every account that goes to collections. 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 rebuild your credit with payment history, but it's the surest way to show that you're able to make payments to a bank.
Knowing the ways you can build your credit score, you can move toward becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid adverse effects your credit score. With the help of Danii Sedillo, Stanton Realty, shopping for a mortgage can be a stress-free experience 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.
Danii Sedillo, Keller Williams Realty doesn't judge you based on your credit history and can help you step into home ownership with the best mortgage lender for you. E-mail us at firstname.lastname@example.org or call (915) 929-2755 for additional information.