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 FICO score, purchasing a house is harder and, you could end up renting for another couple of years in Annapolis until you build up your score.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people traditionally having a score of 650. 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 calculating your FICO score include:

• 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?
• Credit Inquiries — How many times has your credit history been accessed by someone other than you?

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. This means you have three scores, one for each bureau.

Lenders want to be positive that allowing you a loan is a safe move. Your FICO score gives lenders a view of what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is less than that, you can still qualify for a loan, but the interest accumulated over time could be more than double that of someone having a higher FICO score.

We're used to working with all levels of credit scores. Contact us 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 change in your FICO score with small changes, but your score can improve in a year by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. Here are some methods to improve your credit score:

• Pay on time. Delinquent payments instantly drop your credit score. It's where people who have recently experienced job loss see the biggest dip 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 responsible enough to make payments to a bank.
• Correct your credit report. If you find 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 give extra care to make sure the activity reported is correct.
• Spread your debt around. 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 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 the majority of your debt taking up the balance one card.
• Retail cards and gas cards. For those who have no credit or less-than-stellar credit, chain 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 FICO score. You must always beware of charging a large balance for too long because these types of cards traditionally have a higher interest rate.
• Don't let your cards get dusty. 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 one or two payments.

Now that you're better 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 it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Berkshire Hathaway Home Services PenFed Realty, shopping for a mortgage can be a stress-free experience so you, too, can achieve home ownership.

To learn more, visit 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.