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 starts the home buying process. Without an above average credit score, buying a house is more difficult and, you could end up renting longer than you expected in Nashville until you improve your score.

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 650, but scores range from 300 to 850. In recent years, however, some borrowers have seen their score drop dramatically because of unemployment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in determining your FICO score include:

• 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 many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus your available credit?

When you pull your credit report, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. You have a credit score with all of the bureaus.

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 FICO score gives lenders an insight into what type of borrower you'll be 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. You'll still qualify for a loan with a lower score, but the interest accrued over the life of the loan could be more than double the amount of an individual with a superior credit score.

Staying on top of your FICO score is the best way to ease into buying a home. Contact us and we can help you get on the right track to the home of your dreams.

How do you obtain a better score? Building your FICO score takes time. It can be hard to make a significant change in your credit score with small changes, but your score can improve in a few years by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:

• 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 with payment history, 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 discover incorrect items 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 don't want to have one card that is at the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have the bulk of your debt sitting on a single card.
• Chain store cards and gas station cards. For those who have no credit or less-than-stellar credit, store credit cards and gas credit cards are ways to repair credit, increase your spending limits and keep up your payments, which will raise your FICO score. You should always beware of keeping 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 have older cards, or are just getting started with credit, be sure to use your cards so that your accounts maintain an active status. But, make sure you pay them off in no more than two or three payments.

Knowing the ways you can raise your credit score, you're one step closer to becoming a homeowner. Remember that when you're ready to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid adverse effects on your credit score. With the help of Beck & Beck Realty, Inc, 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 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.