Scoring Your Credit

Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet starts the home buying process. Putting back your money for a down payment is great, but if you lack a strong credit score to reinforce it, you could end up renting for another couple of years in Mechanicsville until your FICO score is acceptable.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. In recent years, however, some borrowers have seen their score drop by hundreds of points after unemployment, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in calculating your FICO score include:

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

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO 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 less than that, you can still qualify for a loan, but the interest accumulated over the life of the loan could be more than double the amount of someone having a superior FICO score.

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

There are plans to increase your score. Improving your FICO score takes time. It can be hard to make a large-scale change in your number with small changes, but your score can improve in a few years by monitoring 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. Here are some methods to improve your credit score:

• Use your credit. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts stay active. But, make sure you pay them off in no more than two or three payments.
• Stay on top of payments. Payment history is a big factor in your FICO 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 most reliable way to show that you're able to make payments to a bank.
• Ensure that your credit history is correct. If you discover mistakes on your credit report, write to 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.
• 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 limit and have your remaining cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have the most of your debt sitting on a single card.
• Apply for service station cards or chain store credit. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You should always beware of maintaining a high balance for more than a couple of billing cycles because these types of cards traditionally have a steeper interest rate.

Knowing the ways you can raise your credit score, you're one step closer to becoming a homeowner. Know that when it's time to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Lighthouse Realty, Inc., shopping for a mortgage is sure to go more smoothly so you, too, can become a homeowner.

To learn more, visit 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.