Tips on Improving Your FICO Score for Home Buying

Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Putting back your money for a down payment is great, but if you don't have a strong credit score to reinforce it, you could find yourself renting for another couple of years in San Diego until your score improves.

A FICO score is a collection 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 traditionally having a score of 650. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is a low score and that often means you can't get credit. Some of the factors in deciding your FICO score are:

• Payment History — How often do you make late payments?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• 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?

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 credit score gives lenders a view of what type of borrower you are based solely on 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 satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated over the life of the loan could be more than double that of an individual having a higher credit 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 there? Improving your FICO score takes time. It can be hard to make a significant stride change in your credit score with quick fixes, but your score can improve in a year 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 helpful hints:

• Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having 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 20% of their credit limit than to have the most of your debt taking up the balance a single card.
• Apply for gas cards or chain store credit. For those who have no credit or below average 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 avoid charging a large balance for more than a couple of billing cycles because these types of cards usually have a surprisingly high interest rate.
• Keep your cards in rotation. 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, make sure you pay them off in one or two payments.
• Keep up with payments. Delinquent payments drastically drop your credit score. 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 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 find 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 pay extra attention to make sure the activity reported is correct.

Knowing the methods you can use to raise your FICO score, you're one step closer to becoming a homeowner. Know that when you're ready to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Shapar Homes, 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.