The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. To become a homeowner, considering your credit score is a must along with the type of loan for which you'll qualify in Fort lauderdale, Florida.
The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people traditionally have a score of 650, but scores are tiered from 300 to 850. In recent years, however, some people have seen their score drop by hundreds of points because of job loss, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in reviewing your FICO score include:
- 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?
- Payment History — How many times do you make late payments?
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 models 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.
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 credit score gives lenders insight into what type of borrower you'd be based solely on your credit history. You'll need a score of at least 700 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over time could be more than double the amount of an individual with a superior FICO score.
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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.
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You want a higher score, but how do you get it? Improving your FICO score takes time. At Charles Rutenberg Realty, LLC, we know it's hard to make a significant change in your FICO score with quick fixes, but your score can improve in a year or two by monitoring 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 pointers:
- Stay on top of payments. Late payments hurt your credit history. It's one of the reasons people who have recently been unemployed 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 show that you're responsible enough to make payments to a bank.
- 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 sound like a good idea. But, you don't want to have one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the majority of your debt taking up the balance one card.
- Apply for service station cards or chain store credit. For those who have no credit or low credit, store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and have a solid payment history, which will raise your FICO score. Simply beware of keeping a balance for more than a couple of months because these types of cards usually have a surprising interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts stay active. But, be sure to pay them off in one or two payments.
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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 home, you'll want to keep your applications within a two-week window to avoid a negative mark on your credit score. With the help of Charles Rutenberg Realty, LLC, the loan process can be a stress-free experience so you, too, can achieve home ownership.
To learn more, visit www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.
At Charles Rutenberg Realty, LLC we don't judge you based on your credit and can help you get back into home ownership with the best mortgage lender for you. E-mail us at sales@cstrealestate.com or call 954-818-4743 for more information.
