Scoring Your Credit - How's Your FICO?

Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you don't have an acceptable credit score to reinforce it, you could find yourself renting for another couple of years in Grand Prairie until your score improves.

The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with most people traditionally having a score of 600. 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 credit. Some of the factors in reviewing your FICO score include:

• 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?
• 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?

In reviewing your credit history, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate 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.

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 an insight into what type of borrower you'll be based solely on 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 decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued over time could be more than double that of someone having a superior credit score.

We're used to working with all levels of credit scores. Call us at (972) 504-8021 and we can help you get on the right track to the home of your dreams.

There are plans to raise your score. Building your FICO score takes time. It can be rare to make a significant stride change in your FICO score with small changes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these pointers:

• 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 at the maximum 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 taking up the balance a single card.
• Chain store cards and service station cards. For those who have no credit or low credit, department store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and have a solid payment history, which will raise your credit. You must always beware of maintaining a high balance for too long because these types of cards usually have a larger interest rate.
• Keep your cards active. Whether you have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.
• Pay on time. Late payments kill your credit history. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the surest way to show that you're able to make payments to a bank.
• Ensure that your credit history is correct. If you discover incorrect items 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 pay extra attention to make sure the activity reported is correct.

Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Know that when you're ready to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Target Cost Realty, LLC, the loan process is sure to go more smoothly 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.