How's Your Score?
Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. To propel your dreams of homeownership forward, considering your credit score is a must along with the type of loan for which you'll qualify in Park City, Utah.
The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, but scores are tiered from 300 to 850. With the change in the economy, however, some people have seen their score lowered because of job loss, 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 are:
- 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 credit cards and loans?
- Payment History — How often do you make late payments?
When you pull your credit report, you'll see 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. This means you have three scores, one for each bureau.
Lenders want to ensure that allowing you a loan is a safe move. Your credit score gives lenders a view of what type of borrower you are solely because of your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double the amount of someone having a higher FICO score.
We're used to working with all levels of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
There are methods to boost your score. Improving your FICO score takes time. It can be difficult to make a significant change in your FICO score with quick fixes, 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 most important thing 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 don't want to have 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 transferred to one card.
- Apply for gas station cards or department store credit. For those who have no credit or below average credit, department store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and stay on top of your payments, which will raise your credit. You must always beware of carrying a large balance for too long because these types of cards usually have a larger interest rate.
- Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards to make sure your accounts stay active. But, be sure to pay them off in one or two payments.
- Pay on time. Delinquent payments drastically drop your credit score. It's one of the reasons people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to prove 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, 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 ways you can raise your credit score, you can move toward becoming a homeowner. Know that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of Brown & Company of Park City, Inc., shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.
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.