FICO - The First Step to Home Buying

Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. To become a homeowner, considering your credit score is a must along with the type of lender for which you'll qualify in Annapolis, Maryland.

The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. With the change in the economy, however, some borrowers have seen their score drop dramatically because of job loss, delinquent credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in calculating your FICO score include:

• 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?
• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — Do you pay your bills on time each month?

Lenders want to be positive that allowing you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you'd be based solely on your credit history. You'll need a score of at least 700 to get a decent 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 having a superior FICO score.

We're used to working with all levels of credit history. Call us at 410-647-8000 ext. 817 and we can help you get on the right track to the home of your dreams.

You want an improved score, but how do you get there? Building your FICO score takes time. It can be difficult to make a significant stride change in your credit score with quick fixes, but your score can improve in a few years by monitoring your credit report and by using credit extended to you to raise your score, instead of ruin it. The best way to do this is to know your FICO score. You'll improve your credit score by using these tips:

• Stay on top of payments. How often you're late with payments greatly affects 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 rebuild your credit this way, but it's the most reliable way to prove that you're able to make payments to a bank.
• Correct your credit report. If you discover 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.
• Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at a smaller balance than to have all of your debt sitting on a single card.
• Department store cards and service station cards. For those who have no credit or below average credit, retail credit cards and gas credit cards are ways to obtain credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always avoid maintaining a high balance for more than a couple of billing cycles because these types of cards more than likely have a higher interest rate.
• Keep your cards active. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.

Knowing the methods you can use to build up your FICO score, you're one step closer to becoming a homeowner. Remember that when it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid damaging 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 become a homeowner.

Get more information by visiting 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.