How's Your Credit?
Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet starts the home buying process. To make your goal of homeownership realized, considering your credit score is a must along with the type of lender for which you'll qualify in Salisbury.
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 traditionally having a score of 600. With the change in the economy, however, some borrowers have seen their score drop dramatically after job loss, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in determining your FICO score are:
- Types of Credit — Do you have a healthy mix of credit cards and loans?
- Payment History — Do you pay your bills on time each month?
- Credit to Debt Ratio — How much do you owe versus your available credit?
- Credit Inquiries — How many times has your credit history been accessed by someone other than you?
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'll be 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 a satisfactory interest rate. You can get approved for a loan with a lower score, but the interest paid in the long run could be more than double the amount of an individual having a stronger credit score.
Getting your credit in order is the best way to ease into buying a home. Contact us and we 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. It can be rare to make a significant stride change in your FICO score with quick fixes, but your score can improve in a few years 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. You'll improve your credit score by using these helpful hints:
- Ensure that your credit history is correct. If you find 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 pay extra attention to make sure the activity reported is correct.
- Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is at the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have all of your debt transferred to a single card.
- Apply for service station cards or chain store credit. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to improve credit, increase your spending limits and stay on top of your payments, which will raise your credit. You should always beware of holding a high balance for too long because these types of cards normally 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, use your cards to make sure your accounts stay active. But, pay them off in one or two payments.
- Pay on time. 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 restore your credit with payment history, but it's the most reliable way to prove that you're able to make payments to a bank.
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. Keep in mind 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 adverse effects on your credit score. With the help of TMR Realty, Inc., the loan application process can be a stress-free experience so you, too, can become a homeowner.
Learn more about FICO scores at 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.