Scoring Your FICO
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. To become a homeowner, you must consider your FICO score along with the type of lender for which you'll qualify in North Kingstown, Rhode Island.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with most people normally having a score of 600. 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 reviewing your FICO score include:
- 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?
- Payment History — How many late payments have you made?
When you pull your credit report, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. This means you have three scores, one for each bureau.
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 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 700 to get a acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of someone with a higher credit score.
We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
There are methods to improve your score. Improving your FICO score takes time. It can be difficult to make a significant stride change in your number with quick fixes, but your score can improve in a year or two by monitoring 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:
- Keep up with payments. Late payments hurt your FICO score. It's one of the reasons people who have recently been unemployed 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 prove that you're able to make payments to a bank.
- Correct your credit report. If you discover mistakes 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 pay extra attention to make sure the activity reported is correct.
- Even out your debt. At first, this doesn't seem like a good idea. But, you steer clear 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 lower balance than to have all of your debt transferred to one card.
- Store 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 begin your credit history, increase your credit limits and keep up your payments, which will raise your FICO score. You must always avoid maintaining a high balance for more than a couple of billing cycles because these types of cards normally have a surprisingly high 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 to make sure your accounts stay active. But, make sure you pay them off in no more than two or three payments.
Knowing the ways you can improve your credit score, you're one step closer to becoming a homeowner. Know that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Greater R.I. Properties, LLC, shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting myFICO.com, Fair Isaac's informational site and review your credit history for free 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.