Improving Your FICO Score for Home buyers

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, you must consider your FICO score along with the type of loan for which you'll qualify in Oklahoma County.

The Fair Isaac Company bases your FICO score on the summary of your complete credit history. Most people traditionally have a score of 650, but scores range from 300 to 850. 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 a decent interest rate. Some of the pieces in calculating your FICO score are:

• Payment History — Do you pay your bills on time ?
• 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 credit cards and loans?

When you pull your credit report, you'll discover 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 each 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 credit score gives lenders an insight into 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 an acceptable interest rate. You can qualify for a loan with a lower score, but the interest accrued in the long run could be more than double that of an individual with a better FICO score.

How do you obtain a higher score? Building your FICO score takes time. It can be rare to make a significant stride change in your number with quick fixes, but your score can improve in a few years by keeping tabs 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, be sure to use your cards to make sure your accounts stay active. But, pay them off in no more than two or three payments.
• Keep up with payments. Late payments hurt your credit score. It's where people who have recently been unemployed 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.
• Ensure that your credit history is correct. 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.
• Spread your debt around. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is maxed out 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 most of your debt transferred to a single card.
• Retail cards and service station cards. For those who have non-existent credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to start your credit history, increase your spending limits and keep up your payments, which will raise your FICO score. You should always avoid holding a large balance for too long because these types of cards normally have a larger interest rate.

Knowing the methods you can use to improve your credit score, you're one step closer to becoming a homeowner. Remember 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 Kiva Realty, the loan application process is sure to go more smoothly so you, too, can achieve home ownership.

Learn more about FICO scores at www.myFICO.com, Fair Isaac's informational site and review your credit history for free at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.