Scoring Your FICO

The home buying process doesn't start with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process begins and ends with your finances. Putting back your money for a down payment is a good idea, but if you don't have a strong credit score to back it up, you could find yourself renting for another couple of years in Suffolk County until your score improves.

The Fair Isaac Company bases your FICO score on the summary of your complete credit history. The score ranges from 300 to 850, with the majority of people normally having a score of 600. In recent years, however, some borrowers have seen their score drop dramatically as a result of loss of employment, delinquent credit card accounts, or credit card accounts terminated because the card didn't carry a high balance. Some of the pieces in calculating your FICO score include:

• Credit to Debt Ratio — How much do you owe versus your available credit?
• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of loans and credit cards?
• 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 problem. Your credit score gives lenders an insight into what type of borrower you'd be solely because of your credit history. You'll need a score of at least 740 to get a satisfactory interest rate. You'll still get approved for a loan with a lower score, but the interest accumulated over the life of the loan could be more than double the amount of an individual having a better FICO score.

You want a higher score, but how do you get it? Building your FICO score takes time. It can be hard to make a significant change in your credit 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 helpful hints:

• Use your credit. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.
• Stay on top of payments. Payment history is a big factor in 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 prove that you're responsible enough to make payments to a bank.
• Correct your credit report. If you discover 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.
• Spread your debt around. At first, this doesn't seem like a good idea. But, you steer clear of having one card that is maxed out and have your remaining cards at a zero balance. It's better to have each of your cards at an even balance than to have all of your debt transferred to one card.
• Apply for gas cards or department store credit. For those who have no credit or low credit, chain 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 avoid holding a large balance for too long because these types of cards usually have a steeper 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. Know that when it's time to apply for a loan to purchase a house, you'll want to keep your applications within a two-week window to avoid adverse effects on your credit score. With the help of Vine andSea Real Estate Associates, the loan process can be a stress-free experience so you, too, can achieve home ownership.

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