Ways to Raise Your FICO Score for Home Buying

You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. To make your goal of homeownership realized, considering your credit score is a must along with the type of mortgage loan for which you'll qualify in Islamorada.

The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, but scores are tiered from 300 to 850. Since we've experienced an economic downturn, however, some people have seen their score lowered as a result of underemployment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in deciding your FICO score include:

• 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 late payments have you made?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

Lenders want to be positive that allowing you a loan is a safe move. Your credit score gives lenders an insight into what type of borrower you'd be solely because of your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated over the life of the loan could be more than double the amount of an individual with a near perfect credit score.

You want an improved score, but how do you get there? Building your FICO score takes time. It can be difficult to make a large-scale 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 best way to do this is to know your FICO score. Here are some methods to improve your credit score:

• Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, pay them off in no more than two or three payments.
• Keep up with payments. Delinquent payments drastically drop your credit score. It's one of the reasons people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
• Ensure that your credit history is correct. If you discover incorrect items on your credit report, write to 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.
• Spread your debt around. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have all of your debt sitting on a single card.
• Store cards and gas station cards. For those who have non-existent credit or less-than-stellar credit, retail credit cards and gas credit cards are ways to get credit, increase your credit limits and stay on top of your payments, which will raise your credit. You must always avoid maintaining a high balance for more than a couple of months because these types of cards traditionally have a larger interest rate.

Knowing the methods you can use to build up your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when you're ready to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Coastal Realty of the Florida Keys, the loan process can be a stress-free experience so you, too, can achieve home ownership.

Learn more about FICO scores at www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.