Scoring Your Credit

The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. Saving your money for a down payment is a good idea, but if you lack an acceptable credit score to back it up, you could find yourself renting longer than you expected in Dublin until your FICO score is acceptable.

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 the majority of people traditionally having a score of 600. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is a low score and that often means you can't get a loan. Some of the pieces in deciding your FICO score are:

• Types of Credit — Do you have a healthy mix of loans and credit cards?
• Payment History — How often do you make late payments?
• 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?

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 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 ensure that giving you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you are solely because of your credit history. You'll need a score of at least 700 to get a decent 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 that of an individual with a higher FICO score.

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

You want an improved score, but how do you get it? Building your FICO score takes time. It can be rare to make a large-scale change in your FICO score with quick fixes, but your score can improve in a year or two by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• Use your credit. Whether you have older cards, or are just getting started with credit, be sure to use your cards to make sure your accounts stay active. But, pay them off in no more than two or three payments.
• Pay on time. Payment history is a big factor in your FICO 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 responsible enough to make payments to a lender.
• Ensure that your credit history is correct. If you find 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 give extra care to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't sound like a good idea. But, you don't want to have 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 a lower balance than to have the bulk of your debt transferred to a single card.
• Retail cards and service station cards. For those who have no credit or below average credit, chain store credit cards and gas credit cards are ways to repair credit, increase your spending limits and have a solid payment history, which will raise your FICO score. 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 larger interest rate.

Now that you're more informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Remember that when you're ready to apply for a loan to purchase a home, you'll want to keep your credit inquiries 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 can be a stress-free experience so you, too, can become a homeowner.

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.