How's Your Score?

The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. In reality, the home buying process begins with your finances. Without an acceptable FICO score, purchasing a house is harder and, you could end up renting longer than you expected in Tallahassee until you improve your score.

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 most people normally having a score of 650. Since we've experienced an economic downturn, however, some people have seen their score drop by hundreds of points because of underemployment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the pieces in deciding your FICO score include:

• 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 times do you make late payments?
• Credit to Debt Ratio — How much do you owe versus your available credit?

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 FICO score gives lenders a view of what type of borrower you are solely because of your credit history. You'll need a score of at least 740 to get a acceptable interest rate. If your score is less than that, you can still qualify for a loan, but the interest paid over time could be more than double that of someone having a superior FICO score.

You want a higher score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a large-scale change in your credit score with quick fixes, but your score can improve in a year or two by monitoring 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:

• Chain Store cards and gas cards. For those who have no credit or less-than-stellar credit, chain store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and keep up your payments, which will raise your credit. You must always avoid carrying a high balance for too long because these types of cards more than likely have a steeper interest rate.
• Don't let your cards get dusty. 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.
• Keep up with payments. Your FICO score plummets with every account that goes to collections. It's where people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit with payment history, but it's the surest way to show that you're able to make payments to a lender.
• Ensure that your credit history is correct. If you find 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 pay extra attention to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't seem like a good idea. But, you want to avoid of having one card that is at the maximum and have your remaining cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have all of your debt sitting on one card.

Knowing the methods you can use to improve 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 home, you'll want to keep your credit inquiries within a two-week window to avoid damaging your credit score. With the help of Bevis Realty, the loan application process is sure to go more smoothly so you, too, can become a homeowner.

To learn more, visit 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.