The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The quality of your wallet begins the home buying process. To realize your goal of owning a home, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Raleigh.
A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with most 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 a low score and that often means you can't get credit extended to you via a mortgage loan. Some of the pieces in calculating your FICO score are:
- Payment History — Do you pay your bills on time each 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?
- Types of Credit — Do you have a healthy mix of credit cards and loans?
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. Because of this, you have three scores, one for each scoring model.
Lenders want to be positive that allowing you a loan is a safe move. Your credit score gives lenders 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 740 or higher to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over time could be more than double the amount of someone with a higher FICO score.
 |
 |
 |
Staying on top of your FICO score is the best way to ease into buying a home. Call us at 919-412-2617 and we can help you get on the right track to the home of your dreams.
|
|
|
|
|
You want a higher score, but how do you get there? Improving your FICO score takes time. At Only Way Realty, we know it's difficult to make a significant stride change in your credit score with quick fixes, but your score can improve in a few years by monitoring your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some methods to improve your credit score:
- Pay on time. Delinquent payments instantly lower your credit score. It's one of the reasons people who have recently been unemployed see the biggest dip 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 responsible enough to make payments to a bank.
- Ensure that your credit history is correct. If you find 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.
- Spread your debt around. At first, this doesn't sound 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 an even balance than to have the bulk of your debt sitting on one card.
- Department Store cards and service station cards. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and have a solid payment history, which will raise your credit. Just beware of carrying a high balance for more than a couple of months because these types of cards usually have a surprising interest rate.
- Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts stay active. But, make sure you pay them off in one or two payments.
|
Knowing the ways you can raise your credit score, you can move toward becoming a homeowner. Remember 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 adverse effects your credit score. With the help of Only Way Realty, the loan application process is sure to go more smoothly so you, too, can become a homeowner.
Get more information by visiting www.myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
At Only Way Realty we work with all tiers of FICO scores and can help you step into home ownership with the best lender for you. E-mail us at cstallings@triangle-dreams.com or call 919-412-2617 for additional information.
