First-Time Buyer's Guide to Better Credit

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. Without an acceptable credit score, purchasing a house is more difficult and, you could find yourself renting longer than you expected in Lomita until you improve your score.

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 are tiered 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 a decent interest rate. Some of the pieces in determining your FICO score are:

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

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 calculate 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.

Lenders want to ensure that allowing 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. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a decent interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double the amount of someone with a stronger credit score.

Staying on top of your FICO score is the first step in purchasing 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 it? Building your FICO score takes time. It can be rare to make a large-scale change in your number with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• Even out your debt. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is holding the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at an even balance than to have the majority of your debt taking up the balance a single card.
• Apply for service station cards or chain store credit. For those who have non-existent credit or below average credit, retail credit cards and gas credit cards are ways to repair credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You should always avoid carrying a high balance for too long because these types of cards more than likely have a surprising interest rate.
• Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts stay active. But, make sure you pay them off in no more than two or three payments.
• Keep up with payments. Your FICO score plummets with every account that goes to collections. 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 rebuild your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
• Correct your credit report. If you find mistakes 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 ways you can raise your credit score, you're one step closer to becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of Kivett Realty, the loan application process 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 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.