How's Your Credit?

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

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 most people traditionally having a score of 600. 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 a low score and that often means you can't get a decent interest rate. Some of the factors in reviewing your FICO score are:

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

In reviewing your credit history, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems 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 scoring model.

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'll be 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 an acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest accrued in the long run could be more than double that of an individual with a better credit score.

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

You want a better 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 small changes, but your score can improve in a year or two by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some methods to improve your credit score:

• Keep your cards active. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, be sure to pay them off in no more than two or three payments.
• Stay on top of payments. Delinquent payments instantly drop your credit score. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to build up your credit with payment history, but it's the most reliable 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 asking 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 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 a lower balance than to have all of your debt transferred to one card.
• Apply for gas cards or retail credit. For those who have non-existent credit or below average credit, department store credit cards and gas credit cards are ways to obtain credit, increase your credit limits and have a solid payment history, which will raise your FICO score. You must always beware of keeping a large balance for more than a couple of months because these types of cards normally have a larger interest rate.

Knowing the ways you can raise your credit score, you're one step closer to becoming a homeowner. Keep in mind 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 Morgan Real Estate & Financial, Inc., 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 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.