Scoring Your Credit
The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The quality of your wallet starts the home buying process. To realize your goal of owning a home, considering your credit score is a must along with the type of lender for which you'll qualify in Park City, Utah.
A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people traditionally have a score of 650, but scores are tiered from 300 to 850. With the change in the economy, however, some people have seen their score lowered because of unemployment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in summing up your FICO score include:
- 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?
- Payment History — How many late payments have you made?
In reviewing your credit history, 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. You have a credit score with all of the bureaus.
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 credit score gives lenders a view of what type of borrower you'd 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 an acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over time could be more than double the amount of someone having a superior credit score.
We're used to working with all levels of credit history. Contact us and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get there? Building your FICO score takes time. It can be difficult to make a significant change in your number 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. You'll improve your credit score by using these helpful hints:
- Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to 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. How often you're late with payments greatly affects your credit score. It's where people who have recently experienced job loss 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 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 asking 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 seem like a good idea. But, you want to avoid 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 less than 40% of their credit limit than to have the majority of your debt sitting on a single card.
- Department store cards and gas cards. For those who have non-existent credit or less-than-stellar credit, store credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your credit. You must always beware of carrying a large balance for too long because these types of cards traditionally have a steeper interest rate.
Knowing the ways you can improve your credit score, you're one step closer to becoming a homeowner. Keep in mind that when you're ready 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 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 review your credit history for free 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.