FICO – The First Step to Home Buying

Raise your FICO score to buy a property in Bayside with KELLER WILLIAMS REALTY LANDMARK as your real estate professional - 917-304-1212

Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process starts with your finances. To realize your goal of owning a home, you must consider your FICO score along with the type of lender for which you’ll qualify.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people traditionally have a score of 650, but scores range from 300 to 850. In recent years, however, some borrowers have seen their score drop by hundreds of points as a result of loss of employment, closed credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding 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 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’d be 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 lower, you can still qualify for a loan, but the interest accumulated in the long run could be more than double the amount of someone having a near perfect credit score.

We’re used to working with all tiers of credit scores. Call us at 917-304-1212 and we can help you get on the right track to the home of your dreams.

There are plans to boost your score. Building your FICO score takes time. It can be difficult to make a large-scale change in your FICO score with small changes, 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. You’ll improve your credit score by using these pointers:

Raise your FICO score to buy a home in Bayside with KELLER WILLIAMS REALTY LANDMARK as your real estate agent - 917-304-1212

  • Apply for service station cards or department store credit. For those who have non-existent credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and stay on top of your payments, which will raise your credit. You must always avoid maintaining a high balance for too long because these types of cards usually have a surprisingly high interest rate.
  • 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 stay active. But, make sure you pay them off in one or two payments.
  • Stay on top of payments. Your credit score plummets with each account that goes to collections. It’s where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to build up your credit this way, but it’s the most reliable way to prove that you’re able to make payments to a lender.
  • 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 steer clear of having one card that is holding the maximum and have the rest of your cards at a zero balance. It’s better to have each of your cards at about 30% of their credit limit than to have the majority of your debt sitting on one card.

Knowing the ways you can build up your FICO score, you can move toward becoming a homeowner. Remember that when you’re ready to apply for a loan to purchase a house, you’ll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of KELLER WILLIAMS REALTY LANDMARK, the loan process can be a stress-free experience so you, too, can become a homeowner.

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.