Scoring Your Credit - How's Your Credit Score

The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. Saving your money for a down payment is a good idea, but if you don't have an acceptable credit score to reinforce it, you could end up renting longer than you expected in Santa Rosa, California until your FICO score is acceptable.

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 range from 300 to 850. With the change in the economy, however, some people have seen their score drop dramatically as a result of underemployment, charged off credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in summing up your FICO score are:

• Types of Credit — Do you have a healthy mix of loans and credit cards?
• Payment History — Do you pay your bills on time ?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• Credit Inquiries — Do you have too many open accounts?

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 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 an acceptable interest rate. If your score is lower, you can still qualify for a loan, but the interest paid over time could be more than double that of someone with a near perfect FICO score.

Staying on top of your FICO score is the first step in buying a home. Call us at (707) 318-8829 and we can help you get on the right track to the home of your dreams.

How do you boost your credit score? Improving 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 helpful hints:

• Use your credit. 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, pay them off in no more than two or three payments.
• Pay on time. Payment history is a big factor in your FICO score. It's one of the reasons people who have recently been unemployed see the biggest dip in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the surest way to prove that you're responsible enough to make payments to a bank.
• Correct your credit report. If you find 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.
• 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 maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have the majority of your debt sitting on one card.
• Apply for gas station cards or store credit. For those who have no credit or low credit, retail credit cards and gas credit cards are ways to improve credit, increase your spending limits and have a solid payment history, which will raise your credit. You must always beware of charging a high balance for more than a couple of billing cycles because these types of cards traditionally have a surprisingly high interest rate.

Knowing the ways you can build up your credit score, you can move toward becoming a homeowner. Know that when it's time to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Roxanne Mercer Real Estate, shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.

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.