Scoring Your Credit - How's Your FICO?

You might think that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins with your finances. To realize your goal of owning a home, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in North Kingstown, Rhode Island.

A FICO score is a collection 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 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 a low score and that often means you can't get a decent interest rate. Some of the factors 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 many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

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 an insight into what type of borrower you are solely because of your credit history. You'll need a score of at least 700 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 someone with a better FICO score.

Improving your credit score is the best way to ease into purchasing a home. Call us at 401-932-9005 and we can help you get on the right track to the home of your dreams.

How do you get a stronger score? Improving your FICO score takes time. It can be rare to make a significant stride change in your number 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. You'll improve your credit score by using these helpful hints:

• Apply for gas cards or department store credit. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You should always avoid holding a high balance for too long because these types of cards normally have a surprising interest rate.
• Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
• Keep up with payments. Your credit score plummets with each account that goes to collections. 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 restore 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 discover incorrect items 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 give extra care to make sure the activity reported is correct.
• Spread your debt around. At first, this doesn't sound 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 an even balance than to have the bulk of your debt taking up the balance one card.

Now that you're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, 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 adverse effects on 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.

To learn more, visit myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.