Scoring Your Credit - How's Your Credit Score

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. Putting back your money for a down payment is a good idea, but if you lack a strong credit score to back it up, you could end up renting for another couple of years in Greenfield until your FICO score is acceptable.

A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people normally having a score of 650. Since we've experienced an economic downturn, however, some borrowers have seen their score drop dramatically as a result of loss of employment, charged off credit card accounts, or credit card accounts that were closed because they don't carry a balance. Some of the factors in calculating your FICO score include:

• 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 — 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?

Lenders want to be positive that allowing you a loan isn't a risk for them. 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 satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over the life of the loan could be more than double that of an individual having a stronger credit score.

Improving your credit score is the best way to ease into purchasing a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you get a higher score? Building your FICO score takes time. It can be rare to make a significant stride change in your credit score with quick fixes, but your score can improve in a few years by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• Don't let your cards get dusty. 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 maintain an active status. But, be sure to pay them off in one or two payments.
• Pay on time. Delinquent payments instantly lower 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 rebuild your credit with payment history, but it's the surest way to prove that you're responsible enough to make payments to a bank.
• Correct your credit report. If you discover 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.
• Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having 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 smaller balance than to have the bulk of your debt sitting on one card.
• Apply for gas cards or department store credit. For those who have non-existent credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to repair credit, increase your spending limits and keep up your payments, which will raise your FICO score. You must always beware of carrying a high balance for more than a couple of billing cycles because these types of cards more than likely have a surprising interest rate.

Knowing the ways you can improve your credit score, you can move toward becoming a homeowner. Remember that when it's time to apply for a loan to purchase a house, 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 Realiteam Real Estate Group, 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 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.