How's Your Score?

Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet starts the home buying process. Putting back your money for a down payment is a good idea, but if you don't have a strong credit score to reinforce it, you could find yourself renting for another couple of years in Stockton until you build up your score.

A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 650, but scores range from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get credit extended to you via a mortgage loan. Some of the pieces in deciding 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 — How many times do you make late payments?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

When you pull your credit report, you'll discover that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems 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 three 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 risk. Your FICO 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. You'll still get approved for a mortgage with a lower score, but the interest paid over the life of the loan could be more than double the amount of someone with a stronger 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.

You want a stronger score, but how do you get there? Improving your FICO score takes time. It can be hard to make a significant stride change in your number with quick fixes, but your score can improve in a year or two by keeping tabs 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:

• Use your credit. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, make sure you pay them off in one or two payments.
• Pay on time. How often you're late with payments greatly affects your credit score. It's where 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 prove that you're responsible enough to make payments to a lender.
• 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.
• 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 a lower balance than to have the majority of your debt sitting on a single card.
• Apply for gas station cards or retail credit. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your credit. You should always beware of carrying a large balance for more than a couple of billing cycles because these types of cards usually have a surprising interest rate.

Now that you know more about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Know that when you're ready to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Provident Realty Group, the loan application process can be a stress-free experience 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.