Scoring Your FICO

The road to home ownership doesn't start with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process starts and ends with your finances. Putting back your money for a down payment is a good idea, but if you don't have a strong credit score to reinforce it, you could find yourself renting for another couple of years in Oakland, California until your score improves.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 600, but scores range from 300 to 850. 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 credit. Some of the factors in reviewing your FICO score include:

• Payment History — How many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus your available credit?
• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of loans and credit cards?

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 calculate 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.

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 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 740 or higher to get a decent interest rate. You'll still get approved for a mortgage with a lower score, but the interest accumulated in the long run could be more than double the amount of someone having a superior FICO 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 an improved score, but how do you get it? Improving your FICO score takes time. It can be rare to make a significant stride change in your credit score with small changes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• Even out your debt. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is holding the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have the bulk of your debt taking up the balance one card.
• Apply for gas cards or retail credit. For those who have non-existent credit or low credit, department store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and have a solid payment history, which will raise your credit. You should always beware of carrying a large balance for too long because these types of cards usually have a higher interest rate.
• Use your credit. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards to make sure your accounts maintain an active status. But, pay them off in one or two payments.
• Keep up with payments. Late payments hurt 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 restore your credit with payment history, but it's the most reliable way to show that you're responsible enough to make payments to a lender.
• Ensure that your credit history is correct. 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 pay extra attention to make sure the activity reported is correct.

Knowing the ways you can raise your credit score, you can move toward becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Thomas-Chambers Company
BRE # 01208644, 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.