Ways to Increase 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 propel your dreams of homeownership forward, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Tucumcari, New Mexico.

A FICO score is a collection of your years of credit history based on an instrument 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 loan. Some of the factors in reviewing your FICO score include:

• Credit to Debt Ratio — How much do you owe versus your available credit?
• 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 credit cards and loans?
• Payment History — How many late payments have you made?

When you pull your credit report, you'll see 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 bureau.

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO score gives lenders an insight into what type of borrower you are 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 a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued over time could be more than double the amount of an individual having a better FICO score.

Improving your credit score is the first step in owning 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 better score? Building your FICO score takes time. It can be rare to make a significant change in your number with quick fixes, but your score can improve in a few years by keeping tabs 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:

• Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts stay active. But, be sure to pay them off in no more than two or three payments.
• Keep up with payments. Late payments kill your credit score. It's one of the reasons 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 surest way to show that you're able to make payments to a bank.
• Correct your credit report. 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.
• Even out your debt. At first, this doesn't seem like a good idea. But, you don't want to have 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 about less than 40% of their credit limit than to have the majority of your debt transferred to one card.
• Apply for gas cards or chain store credit. For those who have non-existent credit or below average credit, chain store credit cards and gas credit cards are ways to repair credit, increase your credit limits and stay on top of your payments, which will raise your credit. You should always avoid carrying a large balance for more than a couple of billing cycles because these types of cards more than likely have a larger interest rate.

Knowing the ways you can build up your FICO score, you can move toward becoming a homeowner. Keep in mind that when you're ready to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of McElroy & Associates, 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 once per year, for free, you can review all three of your credit reports 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.