Ways to Increase Your FICO Score for Home Buying

You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. The content of your wallet begins the home buying process. To realize your goal of owning a home, you must consider your FICO score along with the type of lender for which you'll qualify in .

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 people have seen their score lowered as a result of underemployment, delinquent 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:

• Payment History — Do you pay your bills on time every month?
• 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?

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 a view of what type of borrower you'd be solely because of your credit history. You'll need a score of at least 700 to get a acceptable interest rate. You'll still get approved for a loan with a lower score, but the interest paid in the long run could be more than double that of an individual with a higher credit score.

You want a better score, but how do you get there? Building your FICO score takes time. It can be hard to make a large-scale change in your number with quick fixes, but your score can improve in a year or two 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 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 pay extra attention to make sure the activity reported is correct.



• Spread your debt around. At first, this doesn't seem like a good idea. But, you don't want to have one card that is at the limit 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 all of your debt sitting on one card.



• Store cards and service station cards. For those who have no credit or below average credit, store credit cards and gas credit cards are ways to get credit, increase your credit limits and have a solid payment history, which will raise your FICO score. You must always avoid carrying a large balance for more than a couple of billing cycles because these types of cards normally have a surprisingly high interest rate.



• Keep your cards active. Whether you're just getting started with credit, or if you've got older cards, use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.



• Keep up with payments. How often you're late with payments greatly affects your credit score. It's one of the reasons people who have recently experienced job loss 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 show that you're able to make payments to a bank.

Now that you're more informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Remember that when you're ready 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 Multi Zone Realty, Inc, the loan application process can be a stress-free experience so you, too, can achieve home ownership.

To learn more, visit www.myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year 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.