How's Your Score?

Choosing a lender isn't the first step in becoming a homeowner. The quality of your wallet begins the home buying process. Without an acceptable FICO score, entering into a loan for a house is more difficult and, you could find yourself renting longer than you expected in Oakland, California until you improve your score.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. 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 extended to you in the form of a mortgage loan. Some of the factors in determining your FICO score include:

• Payment History — How many late payments have you made?
• 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?

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. You have a credit score with all of the bureaus.

Lenders want to ensure that allowing you a loan is a safe move. Your FICO score gives lenders an insight into what type of borrower you are 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. 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 the amount of someone having a better credit score.

Staying on top of your FICO score is the first step in owning a home. Contact us and we can help you get on the right track to the home of your dreams.

There are strategies to raise your score. Improving your FICO score takes time. It can be rare to make a large-scale change in your number with quick fixes, but your score can improve in a few years by keeping tabs 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:

• Spread your debt around. At first, this doesn't sound like a good idea. But, you don't want to have one card that is at the limit and have your remaining cards at a zero balance. It's better to have each of your cards at about 30% of their credit limit than to have all of your debt taking up the balance one card.
• Apply for gas cards or store credit. For those who have no credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to get credit, increase your credit limits and stay on top of your payments, which will raise your FICO score. You must always avoid holding a high balance for too long because these types of cards traditionally have a larger interest rate.
• Use your credit. 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, be sure to pay them off in no more than two or three payments.
• Pay on time. Your FICO score plummets with each account that goes to collections. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to build up 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 incorrect items on your credit report, contact 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.

Knowing the methods you can use to build up your FICO score, you're one step closer to becoming a homeowner. Keep in mind 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 Thomas-Chambers Company
BRE # 01208644, shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.

Learn more about FICO scores at 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.