How's Your Credit?

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

The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people traditionally have a score of 600, 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 credit extended to you in the form of a mortgage loan. Some of the pieces in reviewing your FICO score include:

• 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 credit cards and loans?
• Payment History — How many times do you make late payments?
• Credit to Debt Ratio — How much do you owe versus your available credit?

Lenders want to be positive that giving you a loan isn't a risk for them. Your credit score gives lenders an insight into what type of borrower you'd be based solely on your credit history. You'll need a score of at least 740 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest paid in the long run could be more than double that of someone with a higher credit score.

Getting your credit in order is the best way to ease into owning a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you get a better score? Building your FICO score takes time. It can be hard to make a large-scale change in your FICO score with small changes, 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 pointers:

• Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have all of your debt transferred to one card.
• Chain store cards and gas cards. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to improve credit, increase your credit limits and stay on top of your payments, which will raise your credit. You must always beware of holding a large balance for too long because these types of cards more than likely have a surprising interest rate.
• Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, pay them off in one or two payments.
• Stay on top of payments. Delinquent payments instantly lower 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 with payment history, but it's the surest 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 give extra care to make sure the activity reported is correct.

Knowing the methods you can use to improve your credit score, you're one step closer to 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 damaging 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 you can review all of your credit reports for free each year 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.