Ways to Improve Your FICO Score for Home Buying

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins with your finances. Without an acceptable FICO score, purchasing a house is harder and, you could end up renting for another couple of years in Lomita until your score improves.

A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. 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 just that and often means you can't get a loan. Some of the factors in deciding your FICO score include:

• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• 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 often do you make late payments?

In reviewing your credit history, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with each of the bureaus.

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. 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 740 to get a acceptable 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 the amount of an individual with a better FICO score.

Staying on top of your FICO score is the best way to ease into buying a home. Call us at (310) 784-8321 and we can help you get on the right track to the home of your dreams.

There are strategies to raise your score. Building your FICO score takes time. It can be difficult to make a significant change in your credit score with quick fixes, but your score can improve in a year or two 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:

• Correct your credit report. 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 pay extra attention to make sure the activity reported is correct.
• Even out your debt. 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 your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the most of your debt transferred to a single card.
• Retail cards and gas station cards. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You should always avoid holding a large balance for more than a couple of months because these types of cards usually have a surprising interest rate.
• Use your credit. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. 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 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 this way, but it's the surest way to show that you're able to make payments to a bank.

Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid a negative mark on your credit score. With the help of Kivett Realty, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.

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.