Scoring Your Credit - How's Your Credit Score

The home buying process doesn't start with getting pre-approved by a lender 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 loan for which you'll qualify in Santa Rosa.

A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. Most people usually 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 credit. Some of the pieces in summing up 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 loans and credit cards?
• Payment History — Do you pay your bills on time ?

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 models to determine 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.

Lenders want to make sure that allowing you a loan is a safe move. Your credit score gives lenders a view of 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. You'll still qualify for a loan with a lower score, but the interest accrued over time could be more than double the amount of someone with a higher credit score.

Staying on top of your FICO score is the first step in buying a home. Contact us 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 credit score with small changes, but your score can improve in a few years by keeping tabs your credit report and by using your credit wisely. The most important thing 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 sound like a good idea. But, you don't want to have one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at a lower balance than to have all of your debt transferred to one card.
• Apply for gas station cards or store credit. For those who have non-existent credit or less-than-stellar credit, chain 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 credit. You must always beware of maintaining a large balance for too long because these types of cards usually have a surprisingly high interest rate.
• Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
• Stay on top of payments. Your FICO score plummets with every account that goes to collections. 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 this way, but it's the most reliable way to show that you're responsible enough to make payments to a bank.
• Ensure that your credit history is correct. 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 give extra care to make sure the activity reported is correct.

Now that you're better informed about credit reporting, you'll be able to successfully take the first steps to homeownership, and that is improving your FICO score. Keep in mind that when you're ready to apply for a loan to purchase a home, you'll want to keep your lender applications within a two-week window to avoid damaging your credit score. With the help of Roxanne Mercer Real Estate, the loan process can be a stress-free experience so you, too, can become a homeowner.

Get more information by visiting 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.