Ways to Raise Your FICO Score for Home Buying

The home buying process doesn't start 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. Saving your money for a down payment is great, but if you lack an acceptable credit score to back it up, you could end up renting longer than you expected in Mechanicsville, Virginia until you raise your score.

A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people traditionally 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 credit extended to you in the form of a mortgage loan. Some of the factors in summing up your FICO score include:

• Credit to Debt Ratio — How much do you owe versus your available credit?
• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — How many late payments have you made?

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 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.

Lenders want to make sure that giving you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you are based solely on 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 an acceptable interest rate. If your score is less than that, 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 better FICO score.

We're used to working with all levels of credit history. Call us at 8047305030 and we can help you get on the right track to the home of your dreams.

You want a stronger score, but how do you get there? 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 few years by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some methods to improve your credit score:

• Keep up with payments. Late payments kill your FICO score. It's where people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the most reliable way to prove that you're able to make payments to a bank.
• Correct your credit report. If you discover incorrect items 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 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 want to avoid of having one card that is at the maximum 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 all of your debt sitting on a single card.
• Apply for service station cards or store credit. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to improve credit, increase your credit limits and have a solid payment history, which will raise your credit. You must always avoid holding a large balance for too long because these types of cards traditionally have a surprising interest rate.
• Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, 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're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Remember 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 a negative mark on your credit score. With the help of Lighthouse Realty, Inc., shopping for a mortgage can be a stress-free experience 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.