Scoring Your Credit - How's Your Credit Score

Choosing a lender isn't the first step in becoming a homeowner. The content of your wallet begins the home buying process. Without a reasonable credit score, purchasing a house is harder and, you could find yourself renting for another couple of years in Healdsburg, California until you build up your score.

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. Since we've experienced an economic downturn, however, some people have seen their score drop by hundreds of points after job loss, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in summing up your FICO score are:

• 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?
• Credit to Debt Ratio — How much do you owe versus your available credit?

When you pull your credit report, you'll find 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 scoring model.

Lenders want to make sure that giving you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you'd be solely because of your credit history. You'll need a score of at least 740 to get a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated over time could be more than double that of someone having a near perfect credit score.

We're used to working with all levels of FICO scores. Call us at (707) 869-9067 and we can help you get on the right track to the home of your dreams.

You want a better score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a significant stride change in your number with quick fixes, but your score can improve in a year by keeping tabs your credit report and by wisely using credit. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:

• Store cards and gas station cards. For those who have non-existent credit or less-than-stellar credit, store credit cards and gas credit cards are ways to begin your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You must always avoid carrying a large balance for too long because these types of cards traditionally have a higher interest rate.
• Keep your cards in rotation. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts maintain an active status. But, pay them off in no more than two or three payments.
• Keep up with payments. Your credit score plummets with each account that goes to collections. 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 this way, but it's the surest way to prove that you're responsible enough to make payments to a lender.
• Correct your credit report. If you discover incorrect items on your credit report, contact 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 give extra care to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't sound like a good idea. But, you don't want to have 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 all of your debt taking up the balance a single card.

Knowing the ways you can build up your FICO score, you're one step closer to becoming a homeowner. Know 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 a negative mark on your credit score. With the help of RE/MAX Full Spectrum - Roxanne Mercer, the loan process is sure to go more smoothly 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.