How's Your Credit?

The road to home ownership doesn't start with getting pre-approved by a lender or with choosing a real estate agent. The content of your wallet begins the home buying process. Saving your money for a down payment is a good idea, but if you lack an acceptable credit score to back it up, you could end up renting longer than you expected in Naples until your FICO score is acceptable.

A FICO score is a review of your years of credit history based on a model developed by Fair Isaac and Company. Most people usually have a score of 600, but scores range from 300 to 850. With the change in the economy, however, some borrowers have seen their score drop by hundreds of points after underemployment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. 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 — How many times has your credit history been accessed by someone other than you?
• Types of Credit — Do you have a healthy mix of credit cards and loans?

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your credit 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 700 or higher to get a decent interest rate. You'll still qualify for a loan with a lower score, but the interest accrued over time could be more than double that of an individual having a superior FICO score.

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

There are strategies to increase your score. Building your FICO score takes time. It can be hard to make a significant stride change in your number with small changes, 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. Here are some methods to improve your credit score:

• Don't let your cards get dusty. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts stay active. But, pay them off in one or two payments.
• Pay on time. 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 restore 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 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.
• Spread your debt around. At first, this doesn't sound like a good idea. But, you steer clear of having 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 sitting on a single card.
• Apply for gas station cards or chain store credit. For those who have non-existent credit or below average credit, retail credit cards and gas credit cards are ways to obtain credit, increase your spending limits and stay on top of your payments, which will raise your credit. You must always avoid maintaining a large balance for too long because these types of cards usually have a higher interest rate.

Now that you know more about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. 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 a negative mark on your credit score. With the help of Metro Properties, shopping for a mortgage can be a stress-free experience so you, too, can become a homeowner.

Get more information by visiting myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.