First-Time Buyer's Guide to Better Credit

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process begins and ends with your finances. To make your goal of homeownership realized, considering your credit score is a must along with the type of loan for which you'll qualify in Cary, North Carolina.

The Fair Isaac Company calculates your FICO score on the summary of your complete credit history. Most people traditionally have a score of 600, but scores range from 300 to 850. Since we've experienced an economic downturn, however, some borrowers have seen their score lowered as a result of underemployment, closed credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in summing up your FICO score are:

• Types of Credit — Do you have a healthy mix of loans and credit cards?
• 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?

Lenders want to be positive that giving you a loan isn't a risk for them. Your FICO score gives lenders an insight into what type of borrower you'll be based solely on your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. If your score is lower, you can still qualify for a loan, but the interest accumulated in the long run could be more than double the amount of an individual with a superior FICO score.

Staying on top of your FICO score is the first step in owning a home. Call us at (919) 924-4991 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 difficult to make a significant change in your FICO score with small changes, but your score can improve in a year by monitoring your credit report and by wisely using credit. The best way to do this is to know your FICO score. You'll improve your credit score by using these tips:

• Ensure that your credit history is correct. If you discover incorrect items 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 give extra care to make sure the activity reported is correct.
• Even out your debt. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is maxed out and have the rest of your cards at a zero balance. It's better to have each of your cards at a lower balance than to have the bulk of your debt sitting on a single card.
• Apply for gas cards or department store credit. For those who have no credit or below average credit, retail credit cards and gas credit cards are ways to establish your credit history, increase your credit limits and have a solid payment history, which will raise your credit. You must always avoid holding a large balance for too long because these types of cards usually have a surprisingly high interest rate.
• Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts stay active. But, make sure you pay them off in no more than two or three payments.
• Stay on top of payments. Payment history is a huge factor in your FICO 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 rebuild your credit this way, but it's the most reliable way to show that you're able to make payments to a lender.

Knowing the ways you can 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 applications within a two-week window to avoid a negative mark on your credit score. With the help of RE/MAX Performance, the loan application process can be a stress-free experience so you, too, can achieve home ownership.

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.