Tips on Raising Your FICO Score for Home Buying

Choosing a lender isn't the first step in becoming a homeowner. The quality 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 reinforce it, you could find yourself renting for another couple of years in Cary, North Carolina until your FICO score is acceptable.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. Most people usually have a score of 600, but scores are tiered from 300 to 850. Since we've experienced an economic downturn, however, some people have seen their score lowered because of loss of employment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in deciding your FICO score include:

• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• 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?
• Payment History — How often do you make late payments?

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 FICO score gives lenders an insight into what type of borrower you'll be 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 an acceptable interest rate. You'll still get approved for a loan with a lower score, but the interest paid over time could be more than double that of an individual with a stronger credit score.

Getting your credit in order is the best way to ease into 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 improve your score. Building your FICO score takes time. It can be rare to make a large-scale change in your FICO score with small changes, but your score can improve in a few years by monitoring your credit report and by wisely using credit. The most important thing is to know your FICO score. Here are some ways you can improve your credit score:

• Ensure that your credit history is correct. If you find incorrect items on your credit report, write to 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 steer clear of having one card that is holding the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at about 25% of their credit limit than to have the majority of your debt transferred to a single card.
• Apply for service station cards or store credit. For those who have non-existent credit or below average credit, store credit cards and gas credit cards are ways to repair credit, increase your credit limits and stay on top of your payments, which will raise your credit. You must always beware of keeping a large balance for more than a couple of billing cycles because these types of cards more than likely have a steeper interest rate.
• Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards so that your accounts stay active. But, pay them off in no more than two or three payments.
• Pay on time. How often you're late with payments greatly affects your credit 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 restore your credit with payment history, but it's the surest way to show that you're able to make payments to a bank.

Knowing the methods you can use to raise your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid a negative mark on your credit score. With the help of RE/MAX Performance, shopping for a mortgage is sure to go more smoothly 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.