Home buyer's Guide to Better Credit

Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Mechanicsville, Virginia.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 650, but scores range from 300 to 850. Since we've experienced an economic downturn, however, some borrowers have seen their score lowered after job loss, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding your FICO score include:

• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — Do you pay your bills on time every month?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• Credit Inquiries — How many times has your credit history been accessed by someone other than you?

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 systems 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 all of the bureaus.

Lenders want to be positive that giving you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you'd be solely because of your credit history. You'll need a score of at least 700 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 time could be more than double the amount of an individual with a higher credit score.

Staying on top of your FICO score is the best way to ease into buying a home. Call us at 8047305030 and we can help you get on the right track to the home of your dreams.

How do you obtain a better score? Improving your FICO score takes time. It can be difficult to make a significant stride change in your credit score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by wisely using credit. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:

• Pay on time. Late payments kill your FICO score. It's where 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 most reliable way to show that you're responsible enough to make payments to a lender.
• Ensure that your credit history is correct. If you find mistakes on your credit report, contact 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 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 about less than 40% of their credit limit than to have the bulk of your debt sitting on a single card.
• Store cards and service station cards. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to improve credit, increase your spending limits and stay on top of your payments, which will raise your credit. You should always avoid keeping a large balance for more than a couple of billing cycles because these types of cards more than likely have a surprisingly high interest rate.
• Keep your cards in rotation. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, be sure to pay them off in no more than two or three payments.

Now that you know more 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 you're ready 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 Lighthouse Realty, Inc., the loan process is sure to go more smoothly so you, too, can achieve home ownership.

Get more information by visiting 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.