Scoring Your Credit - How's Your FICO?

Most people assume that the home buying process starts with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process starts with your finances. Saving your money for a down payment is great, but if you lack a strong credit score to reinforce it, you could find yourself renting for another couple of years in Taylorsville until you raise your score.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 600. Since we've experienced an economic downturn, however, some people have seen their score lowered because of job loss, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in reviewing your FICO score are:

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

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 models to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each scoring model.

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 credit score gives lenders a view of what type of borrower you are solely because of your credit history. You'll need a score of at least 740 to get a acceptable interest rate. You can qualify for a loan with a lower score, but the interest accumulated in the long run could be more than double the amount of someone having a higher credit score.

We're used to working with all tiers of FICO scores. Call us at 8286328863 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 credit score with small changes, but your score can improve in a year by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:

• Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is at the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the most of your debt transferred to one card.
• Apply for gas cards or chain store credit. For those who have no credit or low credit, department store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and have a solid payment history, which will raise your credit. You should always avoid maintaining a high balance for too long because these types of cards more than likely have a higher interest rate.
• 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 maintain an active status. But, 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 experienced job loss 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 bank.
• Ensure that your credit history is correct. If you find mistakes on your credit report, write to 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.

Knowing the methods you can use to raise your credit score, you can move toward becoming a homeowner. Remember that when it's time to apply for a loan to purchase a home, 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 Bret Mundy Real Estate LLC, the loan application process 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 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.