Ways to Raise Your FICO Score for Home Buying

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts and ends with your finances. To realize your goal of owning a home, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Puyallup.

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

• Types of Credit — Do you have a healthy mix of credit cards and loans?
• 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?

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 determine 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.

Lenders want to be positive that allowing you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you'll 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 an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated in the long run could be more than double that of someone with a near perfect credit score.

We're used to working with all levels of credit scores. Call us at 253.299.2088 and we can help you get on the right track to the home of your dreams.

How do you obtain a better score? Building your FICO score takes time. It can be hard to make a significant stride change in your FICO score with quick fixes, but your score can improve in a few years 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 methods to improve your credit score:

• Ensure that your credit history is correct. If you find mistakes on your credit report, write to the bureau requesting 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.
• Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having 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 an even balance than to have the majority of your debt sitting on a single card.
• Apply for gas station cards or retail credit. For those who have no credit or less-than-stellar credit, chain 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 must always beware of charging a large balance for more than a couple of months because these types of cards more than likely have a higher 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 so that your accounts maintain an active status. But, be sure to pay them off in one or two payments.
• Stay on top of payments. Delinquent payments drastically drop 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 restore your credit this way, but it's the most reliable way to prove that you're able to make payments to a lender.

Now that you're better 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 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 FirstPoint Real Estate, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.

Learn more about FICO scores at 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.