Improving Your FICO Score for Home buyers

Most people assume that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process begins with your finances. Saving your money for a down payment is great, but if you lack an acceptable credit score to reinforce it, you could find yourself renting longer than you expected in Annapolis until your FICO score is acceptable.

A FICO score is a review of your years of credit history based on an instrument developed by Fair Isaac and Company. The score ranges from 300 to 850, with the majority of people normally having a score of 600. Job loss has been common in the last few years, but 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 calculating your FICO score are:

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

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 FICO score gives lenders a view of what type of borrower you are solely because of 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 paid in the long run could be more than double that of someone with a better FICO score.

We're used to working with all levels of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.

You want a stronger score, but how do you get it? Building your FICO score takes time. It can be hard to make a large-scale change in your credit score with quick fixes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• Keep your cards active. 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.
• Stay on top of payments. Payment history is a huge factor in your credit 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 this way, but it's the surest way to show that you're able to make payments to a bank.
• Correct your credit report. If you discover mistakes 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 pay extra attention to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't sound like a good idea. But, you steer clear of having 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 about 30% of their credit limit than to have the bulk of your debt transferred to one card.
• Retail cards and gas station cards. For those who have non-existent credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and keep up your payments, which will raise your credit. You must always avoid keeping a high balance for too long because these types of cards usually have a surprising interest rate.

Knowing the ways you can build up your FICO score, you can move toward 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 adverse effects on your credit score. With the help of Berkshire Hathaway Home Services PenFed Realty, the loan process 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 you can review all of your credit reports for free each year 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.