Scoring 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 starts 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 Lomita, California.

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. In recent years, however, some borrowers have seen their score drop by hundreds of points because of unemployment, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the pieces in calculating your FICO score include:

• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — How many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus your available credit?

Lenders want to ensure that giving you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you'd 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 decent interest rate. You'll still qualify for a loan with a lower score, but the interest accumulated over the life of the loan could be more than double the amount of someone having a near perfect FICO score.

Staying on top of your FICO score is the first step in owning 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? Improving your FICO score takes time. It can be rare to make a significant change in your number with quick fixes, but your score can improve in a year 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 tips:

• Apply for service station cards or store credit. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to obtain credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always avoid holding a large balance for too long because these types of cards usually have a higher interest rate.
• Use your credit. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, make sure you pay them off in one or two payments.
• Keep up with payments. How often you're late with payments greatly affects your credit score. 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 prove that you're able to make payments to a bank.
• Ensure that your credit history is correct. If you find mistakes on your credit report, write to 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 give extra care to make sure the activity reported is correct.
• Spread your debt around. At first, this doesn't seem like a good idea. But, you don't want to have 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 about 30% of their credit limit than to have all of your debt sitting on one card.

Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, 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 adverse effects on your credit score. With the help of Kivett Realty, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.

Learn more about FICO scores at 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.