How's Your Credit?
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. To make your goal of homeownership realized, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in West Bridgewater, Massachusetts.
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. 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 credit. Some of the pieces in calculating your FICO score are:
- Payment History — How often do you make late payments?
- 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?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
Lenders want to make sure that giving you a loan isn't a risk for them. Your credit score gives lenders a view of 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 less than that, you can still qualify for a loan, but the interest accumulated over the life of the loan could be more than double that of someone having a better credit score.
We're used to working with all levels of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get it? Building your FICO score takes time. It can be difficult to make a large-scale change in your credit score with quick fixes, but your score can improve in a year by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Keep your cards active. 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 maintain an active status. But, be sure to pay them off in no more than two or three payments.
- Keep up with payments. Late payments hurt your credit history. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable 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 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 about less than 40% of their credit limit than to have the most of your debt sitting on a single card.
- Apply for service station cards or store credit. For those who have no credit or low credit, department store credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your credit. You should always beware of maintaining a large balance for more than a couple of billing cycles because these types of cards more than likely have a higher interest rate.
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. Know that when you're ready 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 J Michael's Real Estate, LLC, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.
Get more information by visiting 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.