Scoring Your Credit - How's Your FICO?

The home buying process doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. To become a homeowner, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Mechanicsville, Virginia.

A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people normally having a score of 600. 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 pieces in summing up 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 — Do you pay your bills on time every month?
• Credit to Debt Ratio — How much do you owe versus your available credit?

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 credit score gives lenders an insight into what type of borrower you are 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. If your score is lower, you can still qualify for a loan, but the interest accumulated over time could be more than double that of an individual having a superior FICO score.

We're used to working with all tiers of credit scores. Contact us and we can help you get on the right track to the home of your dreams.

How do you obtain a stronger score? Building your FICO score takes time. It can be hard to make a significant stride change in your FICO score with small changes, 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 best way to do this is to know your FICO score. Here are some methods to improve your credit score:

• Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have the bulk of your debt taking up the balance a single card.
• Chain store cards and gas station cards. For those who have no credit or low credit, store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and have a solid payment history, 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 surprisingly high interest rate.
• Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
• Pay on time. Delinquent payments drastically 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 this way, but it's the surest way to prove that you're responsible enough to make payments to a lender.
• Correct your credit report. If you discover 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 methods you can use to build up your credit 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 applications within a two-week window to avoid adverse effects on your credit score. With the help of Lighthouse Realty, Inc., the loan 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 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.