How's Your Credit?
Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. To realize your goal of owning a home, considering your credit score is a must along with the type of lender for which you'll qualify in Tulsa, Oklahoma.
A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people traditionally have a score of 600, but scores are tiered from 300 to 850. Even though more people these days are experiencing job loss and delinquent credit cards, FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get a decent interest rate. Some of the pieces in summing up your FICO score include:
- 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?
- Types of Credit — Do you have a healthy mix of loans and credit cards?
- Payment History — How many late payments have you made?
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 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 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'll be solely because of your credit history. You'll need a score of at least 740 to get a decent interest rate. You'll still qualify for a mortgage loan with a lower score, but the interest accrued in the long run could be more than double that of an individual having a higher FICO score.
We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.
You want a better score, but how do you get there? Improving your FICO score takes time. It can be hard to make a significant change in your number with quick fixes, but your score can improve in a year by keeping tabs your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:
- Spread your debt around. At first, this doesn't sound like a good idea. But, you want to avoid of having 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 about 30% of their credit limit than to have all of your debt sitting on one card.
- Apply for gas station cards or chain store credit. For those who have no credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to obtain credit, increase your spending limits and stay on top of your payments, which will raise your FICO score. You must always avoid charging 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, 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.
- Stay on top of payments. Delinquent payments instantly lower your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to show 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 give extra care to make sure the activity reported is correct.
Knowing the ways you can build up your FICO score, you can move toward becoming a homeowner. Know that when it's time 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 Hickerson Realty, the loan application process 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.