Tips on Improving Your FICO Score for Home Buying

Most people assume that the home buying process starts 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. To become a homeowner, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Dublin, California.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 600, but scores range from 300 to 850. In recent years, however, some people have seen their score drop by hundreds of points because of loss of employment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the factors in calculating your FICO score include:

• 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 — Do you pay your bills on time ?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

When you pull your credit report, 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. You have a credit score with all of the bureaus.

Lenders want to be positive that giving you a loan isn't a risk for them. Your FICO score gives lenders an insight into 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 decent interest rate. You can get approved for a mortgage loan with a lower score, but the interest accumulated over time could be more than double the amount of someone with a higher FICO score.

Getting your credit in order is the first step in buying a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you boost your credit score? Building your FICO score takes time. It can be rare to make a significant change in your FICO score with small changes, but your score can improve in a year or two by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:

• Keep your cards active. 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 one or two payments.
• Stay on top of payments. Late payments hurt your credit history. 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 find 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.
• Spread your debt around. At first, this doesn't sound like a good idea. But, you don't want to have one card that is at the limit and have the rest of your 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 taking up the balance one card.
• Chain store cards and service station cards. For those who have no credit or less-than-stellar credit, retail 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 FICO score. You should always avoid holding a large balance for more than a couple of months because these types of cards more than likely have a larger interest rate.

Knowing the methods you can use to build up your FICO 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 applications within a two-week window to avoid a negative mark on your credit score. With the help of Provident Realty Group, 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 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.