FICO - The First Step to Owning

Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. To become a homeowner, you must consider your FICO score along with the type of lender for which you'll qualify in Dublin.

A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with most people traditionally having a score of 600. With the change in the economy, however, some borrowers have seen their score lowered as a result of loss of employment, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in summing up your FICO score include:

• Types of Credit — Do you have a healthy mix of loans and credit cards?
• Payment History — How many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• Credit Inquiries — Do you have too many open accounts?

In reviewing your credit history, you'll discover 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. As a result, you have three scores, one for each bureau.

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 a satisfactory 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 stronger credit score.

Staying on top of your FICO score is the first step in purchasing a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you obtain a higher score? Improving your FICO score takes time. It can be rare to make a significant change in your credit score with quick fixes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. You'll improve your credit score by using these pointers:

• Even out your debt. At first, this doesn't seem like a good idea. But, you don't want to have one card that is maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have the bulk of your debt taking up the balance one card.
• Apply for gas station cards or chain store credit. For those who have non-existent credit or low credit, store credit cards and gas credit cards are ways to start your credit history, increase your spending limits and stay on top of your payments, which will raise your credit. You should always beware of keeping a high balance for more than a couple of months because these types of cards usually have a steeper interest rate.
• Use your credit. 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, pay them off in one or two payments.
• Pay on time. Late payments kill your credit history. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit this way, but it's the surest way to prove that you're able to make payments to a lender.
• Ensure that your credit history is correct. If you find 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 pay extra attention to make sure the activity reported is correct.

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. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid adverse effects on your credit score. With the help of Provident Realty Group, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.

Get more information by visiting 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.